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Chapter 12 - Solution Manual

09 paragraph discussion sequence 8 267 1 the tax is

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09, paragraph DISCUSSION, sequence 8] ]
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267 1. [The tax is payable by the entity if and only if a dividend is distributed to shareholders. The tax does not reduce future income taxes the entity would otherwise pay. [EITF 95- 09, paragraph DISCUSSION, sequence 9] ] 2. [Shareholders receiving the dividend are entitled to a tax credit at least equal to the tax paid by the entity and that credit is realizable either as a refund or as a reduction of taxes otherwise due, regardless of the tax status of the shareholders. [EITF 95-09, paragraph DISCUSSION, sequence 10] ] See the guidance in paragraphs 740-10-55-72 through 55-74 dealing with determining whether a payment made to a taxing authority based on dividends distributed is an income tax. Basis Differences that Are Not Temporary Differences 740-10-25-31 [Tax-to-tax differences are not temporary differences. Recognition of a deferred tax asset for tax-to-tax differences is prohibited as tax-to-tax differences are not one of the exceptions identified in paragraph 740-10-25-3. [EITF D-031, paragraph , sequence 8.2] ][ An example of a tax-to-tax difference is an excess of [EITF D-031, paragraph , sequence 7.1] ][ the parent entity's tax basis of the stock of an acquired entity over [EITF D-031, paragraph , sequence 7.2.1] ][the tax basis of the net assets of the acquired entity. [EITF D-031, paragraph , sequence 7.2.2.1] ] Forward Commitment Dollar Rolls 815-10-25-15 [Forward commitment dollar rolls [EITF 84-20, paragraph ISSUE, sequence 18] ][that are not otherwise subject to this Subtopic's provisions shall be recognized as either assets or liabilities depending on the rights or obligations under the contracts. [EITF 84-20, paragraph STATUS, sequence 35.2] ] > Derivative Financial Instruments Subject to a Registration Payment Arrangement 815-10-25-16 [Paragraphs 825-20-25-2 and 825-20-30-2 require that a financial instrument subject to a registration payment arrangement be recognized and measured in accordance with other applicable GAAP (for example, this Subtopic) without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement. [FSP EITF00-19-2, paragraph 8, sequence 13.1] ][That is, those paragraphs require that an entity recognize and measure a registration payment arrangement as a separate unit of account from the financial instrument(s) subject to that arrangement. [FSP EITF00-19-2, paragraph 8, sequence 13.2] ] Certain Contracts on Debt and Equity Securities 815-10-25-17 [Forward contracts and purchased options within the scope of this Subsection (see the Certain Contracts on Debt and Equity Securities Subsection of Section 815–10–15) [EITF 96-11, paragraph DISCUSSION, sequence 15.1.1] ][ shall, at inception, be designated as held to maturity, available for sale, or trading in a manner consistent with the accounting prescribed by Topic 320 for that category of securities. [EITF 96-11, paragraph DISCUSSION, sequence 15.1.2.2.2] ][ Such forward and option contracts are not eligible to be hedging instruments. [EITF 96-11, paragraph STATUS, sequence 23.1.2] ] 740-10-25-51 [The tax effect of asset purchases that are not business combinations in which the amount paid differs from the tax basis of the asset shall not result in immediate income statement recognition.
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