Corporation Taxation - Book-to-Tax Flashcards
Bad Debt Expense (which represents an increase in the allowance for doubtful accounts, but no bad debt was written off) will be ________ (added to/deducted from) book income to arrive at taxable income
Added To
Bad debt expense decreased book income; however, since no bad debts were actually written off and the reserve method cannot be used for ta purposes, this amount is not deductible for tax purposes and must be added back to book income to arrive at taxable income
A provision for state income taxes that was deducted per books ________ (is/is not) an allowable deduction in computing taxable income
IS
Therefore there is no book-to-tax difference or adjustment needed
Interest expense on bank loans to purchase US Treasury Bonds that was deducted per books ________ (is/is not) an allowable deduction in computing taxable income
IS
Because the interest income from the obligations is taxable
Therefore there is no book-to-tax difference or adjustment needed
Interest earned on US Treasury Bonds that was included in book income _________ (is/is not) included in computing taxable income
IS
Therefore there is no book-to-tax difference or adjustment needed
A provision for federal income tax that was deducted per books _____ (is/is not) an allowable deduction in computing taxable income
IS NOT
Therefore there is a book-to-tax difference and an adjustment is needed
A net capital loss that was deducted per books _______ (is/is not) an allowable deduction in computing taxable income
IS NOT
Because a corporation can only use capital losses to offset capital gains
Therefore there is a book-to-tax difference and an adjustment is needed
Life insurance premiums paid in which the corporation is the beneficiary that were deducted per the books _____ (are/are not) an allowable deduction in computing taxable income
ARE NOT
Because life insurance proceeds are excluded from gross income
Therefore there is a book-to-tax difference and an adjustment is needed
A state corporate income tax refund that was included in book income _____ (is/is not) included in taxable income
IS
This refund would also be included in taxable income due to the “tax benefit rule” (ie., an item of deduction that reduces a taxpayer’s income tax for a prior year must be included in gross income if later recovered).
Therefore there is no book-to-tax difference or adjustment needed
Life insurance proceeds that were included in book income ___ (are/are not) included in taxable income
ARE NOT
Therefore there is a book-to-tax difference and an adjustment is needed
Net capital losses that are subtracted in computing book income _____ (are/are not) included in taxable income
ARE NOT
This loss will not be included in taxable income and therefore must be added back to book income because a net capital loss is not deductible in computing taxable income.
Therefore there is a book-to-tax difference and an adjustment is needed
This schedule provides a reconciliation of a corporations book income with its taxable income
Schedule M-1
Schedule M-1 provides a reconciliation of a corporation’s book income with its taxable income before the ____ deduction and the _____ deduction
DRD
Net Operating Loss
Federal Income Tax Expense that was expensed under book income _____ (is/is not) included in taxable income as a deduction
IS NOT
Federal income tax expense is not deductible and must be added back to book income.
Therefore there is a book-to-tax difference and an adjustment is needed
T/F
A net capital loss deducted per books would not be deductible for tax purposes, therefore it would appear on the Schedule M-1
TRUE
The Net Capital Loss would be added back to book income on Schedule M-1
T/F
Out-of-town lodging expenses are deductible for both book and tax purposes, therefore it would appear on Schedule M-1
FALSE
Schedule M-1 provides a reconciliation of a corporation’s income per books with the corporation’s taxable income before the NOL & DRD. Since out-of-town lodging expenses are deductible for BOTH book and tax purposes there is no need for it to appear on the reconciliation.
