Exam IV TAX 4001 Review (1).

Exam IV TAX 4001 Review
Corporate Income Tax Formula - ANS-Quite simple; gross income less expenses equals
taxable income

Individual Income Tax Formula - ANS-Quite complex; adjusted gross income and above
the line and below the line deductions

Permanent Book-Tax Differences - ANS-Arise in one year and never reverse

Interest income from municipal bonds (P/T) - ANS-Permanent Book-Tax Difference
Example

Death benefit from life insurance on key employees (P/T) - ANS-Permanent Book-Tax
Difference Example

Interest expense on loans to acquire investments generating tax-exempt income (P/T) -
ANS-Permanent Book-Tax Difference Example

Life insurance premiums for which corporation is beneficiary (P/T) - ANS-Permanent
Book-Tax Difference Example

Meals expense (P/T) - ANS-Permanent Book-Tax Difference Example

Fines and penalties and political contributions (P/T) - ANS-Permanent Book-Tax
Difference Example

Entertainment expense (P/T) - ANS-Permanent Book-Tax Difference Example

Federal income tax expense (P/T) - ANS-Permanent Book-Tax Difference Example

Temporary Book-Tax Differences - ANS-Arise in one year and reverse in subsequent
years

Depreciation expense (P/T) - ANS-Temporary Book-Tax Difference Example

Gain or loss on disposition of depreciable assets (P/T) - ANS-Temporary Book-Tax
Difference Example

, Bad debt expense (P/T) - ANS-Temporary Book-Tax Difference Example

Unearned rent revenue (P/T) - ANS-Temporary Book-Tax Difference Example

Deferred compensation (P/T) - ANS-Temporary Book-Tax Difference Example

Organizational expenditures and start-up costs (P/T) - ANS-Temporary Book-Tax
Difference Example

Warranty expense and other estimated expenses (P/T) - ANS-Temporary Book-Tax
Difference Example

UNICAP (IRC Sect. 263A) (P/T) - ANS-Temporary Book-Tax Difference Example

Interest expense (IRC Sect. 163)(j) (P/T) - ANS-Temporary Book-Tax Difference
Example

Favorable Book-Tax Differences - ANS-Decreases taxable income relative to book
income

Interest income from municipal bonds (F/U) - ANS-Favorable Book-Tax Difference
Example

Death benefit from life insurance on key employees (F/U) - ANS-Favorable Book-Tax
Difference Example

Depreciation expense (F/U) - ANS-Favorable Book-Tax Difference Example

Unfavorable Book-Tax Differences - ANS-Increase taxable income relative to book
income

Interest expense on loans to acquire investments generating tax-exempt income (F/U) -
ANS-Unfavorable Book-Tax Difference Example

Life insurance premiums for which corporation is beneficiary (F/U) - ANS-Unfavorable
Book-Tax Difference Example

Meals expense (F/U) - ANS-Unfavorable Book-Tax Difference Example