ABC corporation has the following activities that should generate book/tax diffe
ID: 2479079 • Letter: A
Question
ABC corporation has the following activities that should generate book/tax differences in 2014:
Purchased $100,000 of 5 year property. Straight-line depreciation is used for book purposes. (Assume ½ year convention for both book and tax).
Purchased $300,000 of 7 year property. $100,000 is immediately expensed under §179. Straight-line depreciation is used for book purposes. (Assume ½ year convention for both book and tax).
Sold a piece of land held for investment, generating a $500,000 gain. The installment method was elected for tax purposes, resulting in ½ of the gain being recognized in the current, and 25% in each of the next 2 years.
Bad debt expense for book purposes is $20,000. These are all expected to occur within the next 12 months.
Assuming a 25% federal tax rate, and a 6% state tax rate, how much of a deferred tax asset/liability would be generated from these activities?
Explanation / Answer
from bad debt no DTA/DTL