Contemporary Tax Practice: Chapter 17

I've January 1 starlight Corp (a calendar year tax payer) recorded 600,000 of goodwill as a result of a business acquisition that made it. The corporation elected to amortize it over 15 years for tax accounting and uses the impairment method for financial accounting purposes. Assume the impairment write offs are $15,000 in year 1 $60,000 in year 5 and 300,000 in year 25.

1. What is the annual schedule M-1 adjustment for each year during the first 15 years of the amortization period?

2. What is the annual schedule M- adjustment for each year during the last 25 years of the amortization period?

3. What is the deferred tax asset or liability balance for year 1, 5 and 25 assuming a 35% marginal tax rate?