Determine the change in the deferred tax asset balance

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Questions -

Q1. Two independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences.

Situation

1

2

Taxable income

$40,000

$80,000

Amount at year-end:

 

 

Future deductible amounts

5,000

10,000

Future taxable amounts

-0-

5,000

Balance at beginning of year

 

 

Deferred tax asset

1,000

4,000

Deferred tax liability

-0-

1,000

The enacted state and Federal tax rate is 25% for both situations. Determine the change in the deferred tax asset balance for the year.

Q2. A corporation was completely liquidated and dissolved during year 14. The filing fees, professional fees, and other expenditures incurred in connection with the liquidation and dissolution are:

a. Deductible in full by the dissolved corporation.

b. Deductible by the shareholders and not by the corporation.

c. Treated as capital losses by the corporation.

d. Not deductible either by the corporation or shareholders.

Reference no: EM132431851

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