Company buys an asset it plans to use for 4 years and then discard. Tax allows...

 

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Company buys an asset it plans to use for 4 years and then discard. Tax allows full expensing in Year 1. GAAP depreciates straight-line over 4 years. (in thousands) Year 1 Year 2 Year 3 Total Tax Income before depreciation 3000 3000 3000 9000 Depreciation deduction 2200 0 0 2200 Taxable income 0 Rate Tax paid 30% 30% 30% 0 Book Income before depreciation 3000 3000 3000 9000 Depreciation expense 550 550 550 1650 Pretax income 0 Tax expense Current Deferred 0 0 0 Tax basis Book basis Total BTD DTL(A) dBTD Tax ETR GAAP total ETR GAAP current ETR Aggegate Company buys an asset it plans to use for 4 years and then discard. Tax allows full expensing in Year 1. GAAP depreciates straight-line over 4 years. (in thousands) Year 1 Year 2 Year 3 Total Tax Income before depreciation 3000 3000 3000 9000 Depreciation deduction 2200 0 0 2200 Taxable income 0 Rate Tax paid 30% 30% 30% 0 Book Income before depreciation 3000 3000 3000 9000 Depreciation expense 550 550 550 1650 Pretax income 0 Tax expense Current Deferred 0 0 0 Tax basis Book basis Total BTD DTL(A) dBTD Tax ETR GAAP total ETR GAAP current ETR Aggegate