XYZ, Inc. reports taxable income of $200,000 for 2008 and has a 30% marginal tax rate....
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XYZ, Inc. reports taxable income of $200,000 for 2008 and has a 30% marginal tax rate. The tax rate is expected to increase to 40% next year and remain at 40% for the foreseeable future. Excluded from the determination of taxable income was a questionable deduction of $20,000 which represented an uncertain tax position (note, taxable income would have been $220,000 if the deduction had not been taken). Despite this uncertainty, XYZ, Inc. records the deduction, and they do feel the deduction satisfies the "more likely than not" criteria. They further anticipate the following probabilities of different outcomes with the IRS: Allowable Deduction Probability $15,000 $12,000 $10,000 $5,000 $0 10% What is the journal entry that XYZ, Inc. will record to account for this uncertain tax position? 30% 25% 20% 15% If XYZ, Inc. is audited in 2009 and the IRS determines that only $14,000 of the deduction was allowed, what would the journal entry be to record the additional taxes due (ignore interest and penalties)? XYZ, Inc. reports taxable income of $200,000 for 2008 and has a 30% marginal tax rate. The tax rate is expected to increase to 40% next year and remain at 40% for the foreseeable future. Excluded from the determination of taxable income was a questionable deduction of $20,000 which represented an uncertain tax position (note, taxable income would have been $220,000 if the deduction had not been taken). Despite this uncertainty, XYZ, Inc. records the deduction, and they do feel the deduction satisfies the "more likely than not" criteria. They further anticipate the following probabilities of different outcomes with the IRS: Allowable Deduction Probability $15,000 $12,000 $10,000 $5,000 $0 10% What is the journal entry that XYZ, Inc. will record to account for this uncertain tax position? 30% 25% 20% 15% If XYZ, Inc. is audited in 2009 and the IRS determines that only $14,000 of the deduction was allowed, what would the journal entry be to record the additional taxes due (ignore interest and penalties)?
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To account for the uncertain tax position related to the questionable deduction of 20000 XYZ Inc wou... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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