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    Tax effect of permanent timing differences

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    When it comes to taxes, one should always be mindful of the fact that without the Internal Revenue Service, there would not be tax issues to worry about. As a follow-up question to this statement, consider the tax issues brought about by permanent differences and temporary differences. Define each type of timing difference and give an example for each, then describe how both types affect and impact the relationship between income tax expense on the income statement and income taxes payable for the amount owed to the IRS.

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    Solution Preview

    The differences between tax and book income include temporary and permanent differences. With temporary differences, it is more of a timing issue where certain items are taxable in a different year from when they are reportable ...

    Solution Summary

    The 151-word explanation discusses permanent versus temporary timing differences together with an example of each type. The impact made by both permanent differences and temporary differences on the balance sheet and income statement is explained.