F6 (Income Taxes) Flashcards
1
Q
Permanent Differences:
A
[subtracted from FI to get TI]
- tax-exempt interest (muni/state bonds)
- life insurance proceeds on officer’s key man policy (proceeds from term life insurance on death of officer)
- nondeductible portion of meal and entertainment exp
- DRD for corporations
- excess % depletion over cost depletion
[added from FI to get TI]
- life insurance premiums when corporation is beneficiary
- certain penalties, fines, bribes, kickbacks, etc
2
Q
Temporary Differences:
A
* DTL: [income later] -installment sales -contracts (% vs completed) - equity method (undistr'd dividends) -"un" G/L (til sec's sold)
[expense 1st]
- DE and amortization
- PPD exp/ins (cash basis for tax; recognize all 1st year)
DTA:
[income now]
-PPD (unearned) rent/int/royalties
[exp later]
- BDE (allow vs direct WO)
- est’d L and warranty exp
- start-up expenses (ACTUALLY IS no diff if amount is <5k b/c of tax rules)
3
Q
as of 2018, no NOL CB is allowed, but NOL CF is allowed infinitely
* NOL CF may require a VA (gift cert) limited to 80% of expected TI
A
JE to record DTA for CF:
Dr DTA
Cr Tax Benefit (reduces book loss)
Cr DTA VA (unusable)
**calculation:
NOL CF - (NY NI*80%) = CF that will not be used
- (CF not used*enacted %) = DTA VA
4
Q
CS DI in equity method investments:
A
CS DI in equity method investments reduces the investment account and will not be reported as DI on the IS (>/=20%-50%)
5
Q
EB RE calculation:
A
BB RE + NI - div = EB RE
