You are on a tax team at a local public accounting firm and you are working with your new client, Drexel Corporation. Drexel Corporation prepares their financial statements (Book Income) based on Generally Accepted Accounting Principles (GAAP). The Controller is very familiar with GAAP accounting but is unsure about this need to adjust Book Income to Taxable Income and wants to understand it better. You have already identified five questions that the Controller has concerning these Book to Tax Differences from your first meeting. You are planning to meet again with the Controller to discuss those listed five items identified below, Items 1 to 5. For that upcoming meeting, please write in a paragraph or so for each item (i.e. 1, 2, 3, 4 and 5) so you can be prepared to verbally discuss with the Controller each item. There is no need for any references to tax law and dont worry about grammar or spelling since this will be your notes only for the upcoming discussion and the Controller wants to understand the concepts.

As discussed above, please write a paragraph or so for each item.

And here are the items discussed with the Controller in the first meeting that you need to be ready to discuss at your next meeting for Drexel, Inc. to help the Controller understand them.

1. Why isnt Taxable Income equal to Book Income that creates this need for looking for the Book to Tax difference and creates a lot of work the Controller asks?
2. Why are corporations considered double taxed on their income?
3. Drexel Corporation pays huge premiums for an expensive and large life insurance policy on the life of the CEO, why is that a Book to Tax Difference.
4. Drexel Corporation has a large amount of Municipal Bonds and earn sizable amounts of Interest Income on those Muni Bonds, why is that a Book to Tax Difference.
5. This corporation is using straight line depreciation for their depreciable equipment and furniture for Book Income, but the Controller heard of using accelerated depreciation for Taxable Income as a beneficial Book to Tax Difference. Why is this a tax benefit?