In 2022, Jetex performed a meals and entertainment study of their current year M&E expenses totaling $24,000. They concluded that only $6,000 of expenses were subject to the 50% disallowance under the IRS rules. The remaining $18,000 would be fully deductible and not subject to the 50% limitation.

However, Jetex believes that the IRS would require the full $24,000 to be subject to the limitation, which would permanently disallow $12,000.  Therefore, if the as-filed tax position (i.e., the full deduction of $18,000 claimed in the current-year tax return) is not sustained, Jetex would be entitled to only a $12,000 deduction in the current year. Jetex's tax rate is 21%.  Ignore state taxes (hint: just use the federal rate).


Required:

What Journal Entry should Jetex book to record the UTP?  Please show your work by describing how Jetex should compute its liability for unrecognized tax benefits.

Answer rating: 100% (QA)

Calculate the UTP Jetex believes that there is a potent... View the full answer