Chapter 16, Problem 16.6BYP

Research Case 16–6

Researching the way tax deductions are reported on a corporation tax return; retrieving a tax form from the Internet

• LO16–1, LO16–2, LO16–3, LO16–8

The U.S. Treasury maintains an information site on the Internet. As part of this site, the Internal Revenue Service provides tax information and services. Among those services is a server for publications and forms which allows a visitor to download a variety of IRS forms and publications.

Required:

1. Access the Treasury site on the Internet. The web address is www.ustreas.gov. After exploring the information available there, navigate to the IRS server for forms and publications via the IRS home page.

2. Download the corporation tax return, Form 1120.

3. Note the specific deductions listed that are deductible from total income to arrive at taxable income. Are any deductions listed that might not also be included among expenses in the income statement?

4. One of the deductions indicated is “net operating loss deduction.” Under what circumstances might a company report an amount for this item?

5. Based on how taxable income is determined, how might temporary differences be created between taxable income and pretax income in the income statement?