Class21 - DefTax1

Class21 - DefTax1 - M351 Notes, Class 21, Taxes Day 1, pp....

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M351 Notes, Class 21, Taxes Day 1, pp. 963-978 (M 11/16) (IRS form 1120 – corp. tax return) Today’s topics: What happens when tax expense does not equal taxes payable? Why might this happen? Can we create a deferred tax asset or liability and see its balance change over time? A. Terminology : the following phrases all mean the same amount on the financial statement prepared for owners—pretax financial income, income before taxes , income for financial reporting, income for book purposes. A similar amount on the tax return is called taxable income Because GAAP and tax rules are often different, taxable income and income before taxes are not usually the same. There are two kinds of differences between items that appear on the financial report to shareholders and the tax return: Temporary differences —arise because some items appear sooner on the tax return than on the financial report to shareholders or appear sooner on the financial report to shareholders than on the tax return. Temporary
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Class21 - DefTax1 - M351 Notes, Class 21, Taxes Day 1, pp....

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