Final answer:
Accelerated depreciation on the tax return creates a deferred tax asset because it allows for higher depreciation expenses on the tax return than on the financial statements, resulting in lower current taxes but higher future taxes. Option d is the correct answer.
Step-by-step explanation:
The question is asking which item creates a deferred tax asset. A deferred tax asset occurs when a business has paid more taxes or anticipates they will pay more taxes on their financial statements than they will actually owe on their tax returns. This situation arises due to differences in the timing of when income and expenses are recognized for accounting purposes versus tax purposes.
Let's review the given options:
Prepaid insurance is an expense paid in advance and is typically an asset on the balance sheet, but it does not create a deferred tax asset.
Rent collected in advance is a liability (unearned revenue) and does not create a deferred tax asset because it's taxable when received.
An unrealized gain from recording investments at fair value might create a deferred tax liability, not an asset, because it represents income that would be taxed in the future.
Accelerated depreciation in the tax return often creates a deferred tax asset. When depreciation expense for tax purposes (via an accelerated method) is greater than the depreciation expense reported for accounting purposes (typically using the straight-line method), this results in lower taxable income in the current year and higher taxes payable in future years.
Therefore, the correct option that creates a deferred tax asset is accelerated depreciation on the tax return. Companies use different depreciation methods for book and tax purposes, and accelerated depreciation on tax returns can lead to temporary differences that give rise to deferred tax assets.