Question
Why does faster tax depreciation usually create a deferred tax liability?
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Answer
Tax deductions come before book expense, so future tax is deferred.
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Question
Why do bad debts and warranty accruals usually create deferred tax assets?
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Answer
Book expense is recognized before the tax deduction.
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Question
Why are tax-exempt interest and DRD subtracted on Schedule M-1?
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Answer
They reduce taxable income but are not in book income the same way.
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Question
Why is federal income tax expense added back on Schedule M-1?
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Answer
It is included in book income but not deductible for tax.
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