Question

Cadillac Square Corporation determined that $1,122,800 of its research tax credit on its current-year tax return was uncertain, but that it was more likely than not to be sustained on audit. Management made the following assessment of the company’s potential tax benefit from the deduction and its probability of occurring.

Potential Estimated Benefit (000s)		Individual Probability of Occurring (%)	Cumulative Probability of Occurring (%)
$	1,122,800	47	47
$	878,550	24	71
$	180,300	21	92
	0	8	100

What amount of the tax benefit related to the uncertain tax position from the research tax credit can Cadillac Square Corporation recognize in calculating its income tax provision in the current year?

Answer 1

solutions Individual probability of ocuring in % potential estimated benefit in Coup's) (A) 1 Camulative I probability of olcusing in % AXB 47% $1122 800 & STS 550 $ 1500 300 UT% 71% 92% 527716 210852 37863 so 100) Accoodingly, an increase of (1122800-878550) $244250 is recorded as the increase in income taxe expense, where $ 244250 is the difference blew the full amount received on the tare and the expected benefit to be received after audit by IRS. The Camarlative probability of more than 50% of occurring is for the potential estimated benefit of $878550. Therefore, the tare benefit amount recognized is & 878550