Describe what is meant by the term “uncertain tax position.” Under what circumstances should a company recognize an uncertain tax position?

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Questions and Answers

1. Describe what is meant by the term “uncertain tax position.” Under what circumstances should a company recognize an uncertain tax position?

Use at least three of the companies’ 10-K’s (any three of the five provided, you may choose) and address the following questions for each company.

The undefined tax position is a condition in which taxpayers trust its explanation of earnings recognition is less reliable than the interpretation the IRS is likely to be. The company considers the probability of the tax authority to accept their treatment. If there is a probability that the administration will receive an uncertain tax treatment as will be reported in the tax return, the company then will recognize and measure deferred and current tax in the financial statements with the consistency of tax return treatment. If there is no like that the tax law, will admit the company tax payment, then the enterprise reflects uncertainty in measuring deferred and current taxes in the financial statements.

2. How much did each company receive in the refund of excise taxes?

From these three company namely the Rock- ten Co., Temple-Inland and Boise Inc.

It recorded that both Rock-Tenn Co. and Temple-Inland. Out of the 19 establishments, revealed that they claimed for the black liquor credits valued more than $6.5 billion. The acknowledgments demanded in 2008 and 2009. This made the Assembly put a banned for any further tax credits for involving black whiskey in 2010.

Boise Inc. An International Paper industry, in 2013 it’s annual filing with the SEC, documented an income tax refund of $753 million regarding the IRS’s 2010 conclusion to treat paybacks from the alternative fuel mixture credit (AFMC) as nontaxable income.

3. What explanation, if any, did the company provide for why it treated the tax refund as taxable income or not?

These companies were treated as refunds in their commercial revenue, as cut out tax credit refunds; this lead to the concludes ion that without these amounts from taxable income is an uncertain tax position focused to FIN 48.

4. If the company excluded the tax refund from taxable income, did the company record an unrecognized tax benefit related to the tax refund? If the company did not discuss it, you might assume that the answer is no.

On Nov 30, 2009 – Lease accounting tips for public and private establishments FIN 48 did not provide any relevant examples for nonpublic entities relating to unrecognized tax benefits or a choice to reject recording payable income in a tax return. The guidance in Topic 740 states that if the taxing authority’s law and regulations characterized the income tax to the owners, amounts due for the taxing authority should categorize as a transaction with proprietors.

5. If the company did record an unrecognized tax benefit, what percentage of the maximum potential benefit did they reserve?

Feb 28, 2013 – the smaller reporting for Rock- ten Co., Temple-Inland and Boise Inc. companies corrugated goods production plants. These industries include Rock-Tenn Company, Boise Inc. And Temple Inland, Inc. Gets 10%, which had included in the changes to its standby for unrecognized, tax benefits

6. What were the net operating loss balances at each company, if they stated?

Rock-Tenn Company: Given these doubts, we currently evaluation that capital costs for ecological resolutions, without expenditures that are related to the Maximum Realizable Control Technology (MACT) platforms and landfill, will be $9 million in 2010, $6 million in 2011, and $6 million in 2012. The projected costs could be significantly high if more inflexible laws and regulations implemented.

Boise Inc.: Cascade produces Wood Products and makings plywood, engineered wood products, lumber, and particleboard; the public company with capital over $5 billion in 2017,

Temple-Inland: Financial Information for a global paper and packaging company capital of $47 million ($36 million after taxes), for the year Feb 26, 2015.

7. Did the company have a positive or negative pre-tax book income? How much debt did the company have? How much debt did the company have in comparison to its pre-tax, pre-interest expense book income (also called, earnings before interest and taxes)?

It was a negative pre-tax book income as the Shareowners benefited from the strong free money flow from the International Paper have risen by 14 percent. In 2012 the upheld a strong balance sheet, self-effacing $1.9 billion in debt. The International Paper’s success was reinforced by the manufacturing company that leads to merging with other Packaging Industrial business.

8. Assume that, excluding the refund of excise taxes and the use of net operating losses, the company’s taxable income and pre-tax book income were equal. After deducting the refund of excise taxes and applying net operating losses to the maximum extent possible (that is, at most reducing taxable income to zero), would the company have had positive or negative taxable income?

The federal income tax, according to section 269 did not apply. The government minor experienced networking losses that counterbalance the taxable income of other associates of the companies were permitted to file a consolidated yield that includes the income tax refund, was taken to please the lien for criminal taxes other than for community use. So the companies have positive taxable income.

9. Did these companies have the same auditor or different auditors?

Providing the information you just compiled, address the subsequent demands for each establishment:

By same auditing firm, as These companies are hiring professional Auditors from (CISAs) public accounting firms to be engaged by customer firms or establishments like (Rock- ten Co., Temple-Inland and Boise Inc.) ISACA was formerly known as the Information Systems Audit and Control.

10. If a company excluded the tax refund from taxable income and did not record an unrecognized tax benefit, what must the company believe about whether the IRS and tax courts will challenge and allow this exclusion? Explain using the language of FIN 48.

FASB Understanding no. 48 (FIN 48), for Doubt in Income Taxes, that groups the onset for knowing the assistance of tax return situations in the business statements as it is “more likely than not” more than 50% to be sustained by a demanding specialist. The consequence is most noticeable as the doubt arises in the period amount to the deduction.

11. If a company excluded the tax refund from taxable income and did record an unrecognized tax benefit, what must the company believe about whether the IRS and tax courts will challenge and allow this exclusion? Explain using the language of FIN 48.

When a taxpayer put on a prohibiting, exception, or creditors to detail goods that comprised in the commercial accounting revenue, and FAS 109 books in the instant tax discount as an enduring modification from income book, when reducing the article’s real income tax rate stated in the financial declaration annotations. Lasting alterations affect the calculation and disclosure of the present national, state/local, and worldwide actual tax rates. Provisional changes give rise to weather a delayed tax responsibility or an overdue tax asset. When an assumption is faster, or income postponed from that allowed for financial account purposes, an overdue tax obligation is created and described on the balance sheet. When the presumption suspended the salary is enhanced from that recorded in the files, a delayed tax benefit produced.

For every bookkeeping year, the monetary declarations greatest changes in the entity’s postponed tax assets or obligations that are visible to temporary alterations among record books and taxable income when using, Using FAS 109 vocabulary, the taxpayer likely favors the creation of everlasting tax modifications so as to decrease the operative tax rate for the period and uses provisional changes to create and increase the postponed tax liability, because tax discounts improve the entity’s cash flow for the current reported period.

12. If a company included the tax refund in taxable income, what must the company believe about whether the IRS and tax courts would challenge and allow this excluding the tax refund? Explain using the language of FIN 48.

The use of FIN 48 importantly spreads the total and category of public revelations by GAAP taxpayers. This can upset the probability that a tax situation can be tested using the IRS auditing particularly if further announcements disclose the power and weaknesses of locations taken on the tax reappearance. It stated that the scope of FIN 48’s properties the financial reporting and tax populations is the most wide-ranging in memory.

13. What similarities and differences do you notice among the companies that accounted for the excise tax refund (that is, treated the refund as taxable or not, and reserved an uncertain tax position or did not) in the same way?

Rock- ten Co., Temple-Inland and Boise Inc. companies do not treat it as the taxable refund.

14. What similarities and differences do you notice among the companies that accounted for the tax refund differently?

The similarities between

All the companies are Limited liability protection: And they offer limited accountability protection, for their shareholders who usually are not personally responsible for business debts and liabilities.

Structure: Both have investors, directors, and officers. Investors are the proprietors of the establishment, and they designate the board of executives, who in turn supervise and straight corporation affairs and decision-making but are not guilty of day-to-day operations. The directors elect the officers to manage daily business affairs.

The differences

Taxation: Taxation is often reflected as the most significant difference for business owners when calculating them.

Personal Income Taxes: With both types of establishments, personal income tax is due for both on any salary drawn from the corporation and any dividends received from the corporation.

15. Given these similarities and differences, what factors – other than the appropriate use of FIN 48 might have affected these companies’ decisions on how to account for the tax refund?

To reveal the liability for uncertain tax benefits claimed on its tax return that not reviewed on paper for evaluation and the findings of the academic literature on FIN 48 in the context of research cannot conclude that one accounting regime is better than the another.

Works cited

FDIC: FDIC Consumer News Winter 2004/2005 Archived September 26, 2006, at the Wayback Machine

USA Today page 1B published April 13, 2012 “Tax refund provides cash to file bankruptcy.”

http://www.greenbaypressgazette.com/article/20130104/GPG03/301040162/Changes-don-t-worry-tax-preparers[dead link]

CNN, Victoria Cavaliere. “Average tax refund down 8% so far this season”. CNN. Retrieved 2019-02-11.

https://www.irs.gov/businesses/small/article/0,,id=161493,00.html Archived July 15, 2007, at the Wayback Machine

“Where’s My Refund? – It’s Quick, Easy and Secure”. www.irs.gov. Retrieved 2016-09-04.