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Company X determined that its $400,000 of its general business credit on its current year tax return was uncertain, but that it was more likely
- Company X determined that its $400,000 of its general business credit on its current year tax return was uncertain, but that it was more likely than not to be sustained on audit. The tax director made the following assessment of the companys potential tax benefit from the deduction and its probability of occurring.
Potential Estimated Individual Probability Cumulative Probability
Benefit of Occurring (%) of Occurring (%)
$400,000 30 30
320,000 25 55
200,000 23 78
0 22 100
Part A: What amount of the tax benefit related to the uncertain tax position from the research tax credit can the company recognize in calculating its income tax provision in the current year? Part B: What is the portion of the credit that will be unrecognized (require a liability) for uncertain tax positions?
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