Question
Notes: Please distinguish your final answer to each part in a clear way (e.g., with highlighter, circled, double-underlined, etc.). Grading rubric for each problem: All
Notes:
Please distinguish your final answer to each part in a clear way (e.g., with highlighter, circled, double-underlined, etc.).
Grading rubric for each problem:
All possible points if final answer correct and you show your work to support the answer.
s possible points if incorrect final answer but you show your work to support incorrect answer.
possible points if you just show correct final answer but no work to support the correct answer.
0 points if you show incorrect answer and have no work shown to support the incorrect answer.
A firm is preparing its disclosures of uncertain tax benefits in accordance with FIN 48 (as discussed on p. 149-150 of your text. Parts a. and b. list a tax position the firm has identified as having some degree of uncertainty about whether the position will be sustained and a table similar to the one at the bottom of p. 149 in the text for each tax position discussing the firms assessment of different outcome probabilities with the tax position. Using the process described for measurement in those pages, estimate the amount of tax benefits from each tax position the firm should recognize (its reduction in income tax expense) and the amount of unrecognized tax benefit (i.e., the liability). Write both values as positive dollar values and make sure and clearly label which value is the tax benefit vs. the unrecognized tax benefit.
Tax position 1 claims $15,000 reduction in tax expense with tax savings on the return this year. Worth 8 points where there are 4 points for each of the 2 values to be calculated.
Possible Estimated Outcome | Individual Probability of Occurring (%) | Cumulative Probability of Occurring (%) |
$15,000 | 20% | 20% |
$12,500 | 25% | 45% |
$10,000 | 20% | 65% |
$5,000 | 20% | 85% |
$0 | 15% | 100% |
Tax position 2 claims $30,000 reduction in tax expense with tax savings on the return this year. Worth 8 points where there are 4 points for each of the 2 values to be calculated.
Possible Estimated Outcome | Individual Probability of Occurring (%) | Cumulative Probability of Occurring (%) |
$30,000 | 24% | 24% |
$28,000 | 25% | 49% |
$15,000 | 20% | 69% |
$10,000 | 16% | 85% |
$5,000 | 15% | 100% |
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