Question

Uncertain tax positions

I. Are positions for which the tax authorities may disallow a deduction in whole or in part.
II. Include instances in which the tax law is clear and in which the company believes an audit is likely.
III. Give rise to tax expense by increasing payables or increasing a deferred
tax liability.
a. I, II, and III.
b. I and III only.
c. II only.
d. I only

Answer 1

Uncertain tax positions are positions for which the tax authorities may disallow a deduction in whole or in part, and can give rise to tax expense. The correct answer is option a. I, II, and III.

Step-by-step explanation:

Uncertain tax positions are positions for which the tax authorities may disallow a deduction in whole or in part. They typically arise when the tax law is unclear or when the company takes a different interpretation of the law than the tax authorities. These positions can give rise to tax expense by either increasing payables or increasing a deferred tax liability.

Therefore, the correct answer is option a. I, II, and III, because uncertain tax positions encompass situations where the tax authorities may disallow deductions, both when the tax law is clear and when the company believes an audit is likely, and because they affect the tax liability by either increasing payables or increasing a deferred tax liability.