FIN_48_acceleration_of_deductions_solution

FIN_48_acceleration_of_deductions_solution - FIN 48...

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FIN 48 – Acceleration of deductions – SOLUTION Crowell Company acquires an intangible asset with an indefinite life (thus not amortizable for financial statement purposes) in the current year for $30 million. The Company decides to deduct the entire amount of the intangible asset in its current year tax return based on ambiguity in the tax code. However, Crowell’s management does not believe the tax position will more likely than not be sustained under tax authority scrutiny. Rather, they believe that the position that will more likely than not be sustained is the amortization of the intangible asset over a 15-year period. The Company believes that any resolution with the tax authorities concerning the position taken would not occur within one year of the balance sheet date. The Company’s tax rate is 40%. Crowell’s taxable income before considering the intangible asset is $100,000,000. Required
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This note was uploaded on 03/04/2010 for the course TAX 6845 taught by Professor Kelliher,c during the Fall '08 term at University of Central Florida.

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