[Anonymous]

Hi everyone! I am doing my second run-through of the Income Taxes section of Becker F-6. It was definitely one of my weaker areas my first run-through (58% MCQ). Although I didn’t do too hot in most of the other modules my first time through the materials, I have made significant progress and have gained a better grasp of the material the second time around (in my “review” week”). However, I am not making ANY progress in gaining a better understanding of deferred taxes. I am still getting around 60% of my questions right and, more importantly, I just can’t seem to grasp the concepts of the details (i.e. I think I understand the “big picture” but struggle with detailed MCQ). While I try not to rip apart my review course, I feel that Becker does a very weak job of covering this particular area. Even the explanations to the solutions don’t seem to help in explaining the concepts.

Sorry for the long intro/rant. Does anybody have any resources or advice to help me gain a better grasp of this topic, or can somebody do that thing where they summarize the chapter in their “own language?” Thank you in advance!

[wizards8507]

If book income is higher than taxable income, your taxable income will be higher in some future period to “catch up.” Higher taxable income in the future = higher tax in the future = future expense = deferred tax liability.

If book income is lower than taxable income, your taxable income will be “lower” in some future period to “catch up.” Lower taxable income in the future = lower tax in the future = less expense = deferred tax asset.

NY CPA

[Anonymous]

you can think it like what the above poster wrote. what he wrote showed he understood that section pretty well :D. another way is

liabilities/losses related items are DEFERRED TAX ASSETS. (warranty liability, losses on investments, depreciation)

assets/gains related are DEFERRED TAX LIABiLITIES(prepaid assets, gains on investments)

this works MOST of the time, and i dont think questions will get tricky and test highly technical understanding about this. ie(depreciation is usually is a DTL, but can be a DTA due to timing differences. but in the wiley questions i've seen that hasn't been the case)

[nc32]

I also had a tough time with F6 and it finally clicked when I started approaching the deferred tax MC questions by first thinking anout whether the item in question (i.e. warranties, prepaid expenses, etc.) will increase or decrease taxable income in the future. If it increases taxable income in the future (via a tax deduction in a later year) then it's going to be a deferred tax asset.

[Anonymous]

Thank you to everyone who responded and gave such great answers to my question! I really appreciate the insight.. @derf, that is a good rule to follow – a bunch of questions I got wrong were not because I didn't know the formulas, but because I got mixed up with the treatment (+/-) of these various items. @nc32, I am definitely going to try this approach before I even look at the answer selection. Thanks again for responding so quickly – sometimes it is nice to hear rationale in plain ENGLISH, not Becker language 🙂

[Anonymous]

Not trying to go overboard, but if anyone can chime in on loss carry backs too, that would be awesome…

[Author]

Replies