Basis Differences

Question 1

DTA

Answer 1

Deferred tax asset: Items on a company’s balance sheet that may be used to reduce taxable income in the future are called deferred tax assets. The situation can happen when a business overpaid taxes or paid taxes in advance on its balance sheet.

A deferred tax asset can arise when there are differences in tax rules and accounting rules or when there is a carryover of tax losses.
Beginning in 2018, most companies can carryover a deferred tax asset indefinitely.

Question 2

DTL Exception - Domestic subs

Answer 2

• only applies to more than 50% owned domestic subs

Question 3

DTL Exception - Foreign subs and foreign corporate JVs

Answer 3

-Presumption that all undistributed EP will be repatriated
- No DTL recognized if:
1 - indefinitely reinvested (indefinite reversal criterion met) - parent’s ability and intent
2 - net investment remitted tax free - within parent’s control and presently available

Question 4

DTL

Answer 4

Deferred tax liability is a tax that is assessed or is due for the current period but has not yet been paid. The deferral comes from the difference in timing between when the tax is accrued and when the tax is paid. A deferred tax liability records the fact the company will, in the future, pay more income tax because of a transaction that took place during the current period, such as an installment sale receivable.

Question 5

APB 23

Answer 5

The APB 23 exception comes with a significant burden—the “sufficient evidence” requirement. An APB 23 assertion requires that a multinational company provide evidence that demonstrates an ability to meet its domestic cash needs with only U.S. earnings and its plan to reinvest foreign earnings outside the U.S. This documentation usually requires the assertion to be supported by the following: the company’s global business position; financing requirements; capital expenditure requirements; domestic cash flow; liquidity needs; budgets and forecasts; tax-planning strategies; and other similar supporting documents.

Question 6

C Reorg

Answer 6

1- acquisition by one corporation
2- in exchange solely for all or a part of its voting stock
3- of substantially all of the properties of another corporation
(assumption by the acquiring corp of a liability of the other is disregarded for substantially all req)

Question 7

311(b)

Answer 7

(b) Distributions of appreciated property
(1) In general If—
(A) a corporation distributes property (other than an obligation of such corporation) to a shareholder in a distribution to which subpart A applies, and

(B) the fair market value of such property exceeds its adjusted basis (in the hands of the distributing corporation),

then gain shall be recognized to the distributing corporation as if such property were sold to the distributee at its fair market value.