FAR 6.5 & 6.6 - Income Taxes Flashcards
Intrapersonal tax allocation includes:
Income from continuing ops
Discontinued ops
Accounting principle change
Pension funded status change
Unrealized g/l on AFS debt and hedges
Foreign translation adjustments
Instrument specific credit risk
Impact current taxes and never affect future financial or taxable income. Does not affect deferred taxes.
Permanent differences
Impact current and deferred taxes:
Temporary differences
How does one calculate the current liability for taxes?
Tax return X current tax rate = current liability
How does one calculate deferred tax liabilities or deferred tax asset?
Temporary difference X future tax rate = deferred liability or asset
How is the total tax expense calculated?
Current liability - deferred liability or + deferred asset = total tax expense
Examples of permanent differences:
Tax exempt interest (municipal & state)
Life insurance proceeds on key officers
Life insurance premiums when corp. is the beneficiary
Penalties, fines, bribes, kickbacks
No deductible portion of meal & entertainment expense
Dividends received deduction
Excess percentage depletion over cost depletion
The deduction for business interest expense is limited to:
The sum of business interest income + 30% of the adjusted taxable income
Financial statement income first and tax return income later would create a:
DTA or DTL?
DTL
Tax return income first and financial statement income later would create a:
DTA or DTL?
DTA
Financials statement expense first and tax return expense later would create a:
DTA or DTL?
DTA
Tax return expense first and financial statement expense later would create a:
DTA or DTL?
DTL
Examples of items that cause deferred tax assets are:
Prepaid rent, interest, or royalties
Bad debt expense
Estimated liability or warranty expense
Start-up expenses
Examples of items that cause deferred tax liabilities are:
Installment sales
% vs completion method of accounting
Equity method of accounting
Depreciation expense
Amortization of franchise
Prepaid expenses used for the cash basis of tax
If future tax accounting income > future financial accounting income creates a :
DTL or DTA
DTL
If future tax accounting income < future financial accounting income it creates a:
DTA or DTL?
DTA
If it is more than 50% likely that part or all of the deferred tax asset will not be realized, what is recognized?
Aa valuation allowance
When recognizing a tax benefit, what amount is recognized?
The largest amount of tax benefit that has a greater than 50% chance of being realized upon ultimate settlement
At the date a nontaxable entity becomes a taxable entity, what is recognized?
A DTA or DTL for any temporary differences
At the date aa taxable entity becomes as nontaxable entity, what should happen?
Any existing DTL or DTA should be eliminated (written off)
NOLs arising in 2018-2020 can be carried back and carried forward how many years?
Back: 5 years
Forward: indefinitely
NOLs arising in 2021 and beyond can be carried back and forward how many years?
Back: CANNOT BE CARRIED BACK
Forward: indefinitely
NOLs carried forward to tax years beginning in 2021 and beyond are limited to:
80% of taxable income before the NOL deduction
If NOLs are carried back to a year before 2018, tax receivables should be measured at:
The 35% rate
What is the dividends received deduction based on the ownership percentage?
0% - 19% = 50% exclusion
20% - 80% = 65% exclusion
81% - 100% = 100% exclusion
