Why Form 1120 Schedule M 3 Goodwill 2019-2024

In this video, we're going to discuss deferred tax assets. Deferred tax assets are increases in the amount of taxes you're going to save in future periods due to a temporary timing tax difference. Temporary differences occur when there is a difference in timing between tax and book for when revenue is recognized. This means that you will have lower taxes in future periods as a result of this deferred tax asset. For example, let's say in the current period, you have income tax expense of $80. However, the actual income tax payable that you pay to the IRS is $100. This creates a gap or plug that needs to be balanced. In this case, you would have a $20 deferred tax asset, which increases your deferred tax assets by $20. This means that in the future, you will have the benefit of lower taxes. Let's look at a more comprehensive example involving a landlord renting out a house to a fraternity. The monthly rent is $3,000, and the tax rate is 40%. In Year 1, the fraternity pays the extra month's rent before Year 1 is over, resulting in a total rent collected of $39,000. However, for book purposes, only $36,000 is recognized as revenue because only 12 months of rent have been provided. For tax purposes, the revenue is $39,000, creating an excess of $3,000. This temporary difference affects the pre-tax book income and taxable income. The pre-tax book income is $15,000, but the taxable income is $18,000 due to this difference. In Year 2, the situation reverses as the fraternity has already prepaid for the first month. They only have to pay for 11 months in Year 2, resulting in a total rent paid of $33,000. However, for book purposes, $36,000 is recognized as revenue. Now, the tax revenue is...