Tax Allocation for Differences in Original Bases

Abstract

This article examines the permanent differences between taxable income and pretax accounting income. The authors discuss financial accounting for tax expenses in regard to depreciable assets having different starting points and subject to different depreciation methods for financial accounting purposes than for tax purposes. During the study, it was found that the differences between financial accounting depreciation and tax depreciation included both permanent and timing differences. Once these different types of depreciation were separated from one another, the authors found that tax effects of permanent differences and depreciation of asset costs are proportionate to one another.