Question

Permanent tax differences are items that cause a difference between the book income reported on the financial statements and the taxable income reported on the tax return that will not reverse over time. These differences arise because certain items are either only included in the computation of taxable income or only in book income, but not in both.

a) True
b) False

Answer 1

The statement is true. Permanent tax differences cause a difference between the book income reported on financial statements and the taxable income reported on the tax return. They do not reverse over time.

Step-by-step explanation:

The statement is true. Permanent tax differences are items that cause a difference between the book income reported on the financial statements and the taxable income reported on the tax return. These differences do not reverse over time. They arise because certain items are either only included in the computation of taxable income or only in book income, but not in both.