Case 3

During 20X9 Co was audited for its 20X5 tax return with the following results:

Certain R&D Credit wages were disallowed resulting in a reduction to the original credit by $10,000

Machinery placed into service in 20X5 and originally deducted with a MACRS life of 5 years (bonus not elected) was changed to

be capitalized with plant at 39 years, reversing a $25,000 deduction for 20X5. Note future depreciation deductions now increase

co's originally filed 20X5 return took a $2,000 foreign tax credit benefit related to withholding taxes for which they did

not have receipts, and accrued an uncertain tax benefit (FIN 48 reserve) at that time. However, the documentation was found to be complete upon audit and the full amount of credit was allowed.

Interest on underpaid tax of $3,000 was incurred on the audit.

Question a

Which amounts from above are considered discrete in the 20X9 interim projected rate calcuation?

Question b

How do these amounts impact the tabular rollforward (either describe, list or create a table)?

Question c

What is the net dollar impact to the effective tax rate from the activity described?