Springs Inc. has taken a tax position during the year that it believes is based on fairly clear tax law for the payment of $208,000 in salaries and benefits to employees. There are no limits on deductibility and all amounts were fully paid within the statutory time limit, although there is some question on the companys policies for capitalization of a portion of the salaries. Management has a fairly high confidence level in the technical merits of this position. It is clear that it is greater than 50% likely that the full amount of the tax position will be ultimately realized, but it is less than 100%. Springs estimates the probability of sustaining the entire tax position with taxing authorities at 60%. Springs Inc. taxable income is $260,000, which includes the salary deduction of $208,000 referenced previously. If Springs Inc. tax rate is 25% (with no other deferred items), record the income tax journal entry required on December 31.

Recerding Inceme Tax Expense with Tax Uacertainty