Question

In: Accounting

Interest paid on an underpayment of taxes (other than an underpayment of estimated taxes) is not subject to the consumer interest limitation.

Interest paid on an underpayment of taxes (other than an underpayment of estimated taxes) is not subject to the consumer interest limitation.

(a) True

(b) False

 

 

Solutions

Expert Solution

True

Interest paid on underpayment of tax is not subject to the consumer interest limitation. The taxpayer needs to pay interest on underpayment of tax like that if the overpayment is made by the taxpayer the IRS will pay interest on the amount which is excess paid. Consumer interest is the interest on the individuals such as a personal loan or credit card debt etc. and the interest paid on underpayment of tax is not related to the consumer interest limitation. As per the general rule, the interest on underpayment of tax and interest on overpayment for the same period may provide a net interest rate as zero.

This statement is True.

Junaid answered 2 years ago
Next > < Previous

Related Solutions

What penalties apply to the underpayment of estimated​ taxes? The late payment of the remaining tax​...
What penalties apply to the underpayment of estimated​ taxes? The late payment of the remaining tax​ liability? What penalties apply to the underpayment of estimated​ taxes? A. A deductible penalty applies if a corporation does not deposit its required estimated tax installment on or before the due date for that installment. The IRS assesses interest if any remaining tax due is not paid by the due date shown for a properly extended corporate tax return. B. A deductible penalty applies...
Other than income tax, list the taxes have you paid in the last month. For each...
Other than income tax, list the taxes have you paid in the last month. For each tax you list tell me how you paid it and what the rate of tax was (I would assume that there would be at least three types of taxes you have paid over the past month).
Suppose a property has estimated real estate taxes for the current year of $4,398.25 dollars and that taxes are paid at the end of the year.
Suppose a property has estimated real estate taxes for the current year of $4,398.25 dollars and that taxes are paid at the end of the year. If the property is   being sold on May 25 in a year with 365 days and the buyer and seller agree to prorate the taxes at the time of closing with the buyer being responsible for theday of closing, what amount will be charged to the seller on the settlement statement?$1,000.00$1,735.20$2,663.05  None of the above
Bankruptcy Cost - (A) Suppose interest on debt was not paid prior to corporate taxes, so...
Bankruptcy Cost - (A) Suppose interest on debt was not paid prior to corporate taxes, so debt was not tax-advantaged, but interest still had to be paid or else the borrower was in default. Many fewer companies would risk issuing compare debt in this case. How would this negatively impact investors? (B) In their early years, many dot.com companies have earnings (EBIT) that fluctuate dramatically, sometimes positive and sometimes negative. Those companies almost never use debt financing during those early...
List 10 businesses (real business in the Philippines eg. Insular Life) subject to other percentage taxes...
List 10 businesses (real business in the Philippines eg. Insular Life) subject to other percentage taxes and their percentage rates.
The factors affecting demand other than price such as consumer tastes and preferences, the level of...
The factors affecting demand other than price such as consumer tastes and preferences, the level of consumer income, prices for other related goods, the availability of close substitutes, expectations of future price changes cause a shift in the demand curve. Indicate that as well as an example, demonstrating a shift to the left or right for each one.
SALES $25,000 COSTS OF GOODS $16,000 DEPRECIATION $3,000 EARNINGS BEFORE INTEREST AND TAXES $6,000 INTEREST PAID...
SALES $25,000 COSTS OF GOODS $16,000 DEPRECIATION $3,000 EARNINGS BEFORE INTEREST AND TAXES $6,000 INTEREST PAID $2,000 TAXABLE INCOME $4,000 TAXES (34%) $1,360 NET INCOME $2,640 (ADDITION TO) RETAINED EARNINGS $1,584 DIVIDENDS $1,056 CURRENT ASSET 2002 2003 CURRENT LIABILITIES 2002 2003 CASH $4,000 $3,000 ACCOUNTS PAYABLE $3,000 $2,500 ACCOUNTS RECEIVABLE $9,000 $11,000 NOTES PAYABLE $6,000 $6,416 INVESNTORY $5,000 $4,500 LONG TERM DEBT $15,000 $13,000 OWNERS EQUITY FIXED ASSETS COMMON STOCK $14,000 $16,500 NET FIXED ASSET(PLANT AND EQUIPMENT) $30,000 $31,500 RETAINED...
SALES $25,000 COSTS OF GOODS $16,000 DEPRECIATION $3,000 EARNINGS BEFORE INTEREST AND TAXES $6,000 INTEREST PAID...
SALES $25,000 COSTS OF GOODS $16,000 DEPRECIATION $3,000 EARNINGS BEFORE INTEREST AND TAXES $6,000 INTEREST PAID $2,000 TAXABLE INCOME $4,000 TAXES (34%) $1,360 NET INCOME $2,640 (ADDITION TO) RETAINED EARNINGS $1,584 DIVIDENDS $1,056 CURRENT ASSET 2002 2003 CURRENT LIABILITIES 2002 2003 CASH $4,000 $3,000 ACCOUNTS PAYABLE $3,000 $2,500 ACCOUNTS RECEIVABLE $9,000 $11,000 NOTES PAYABLE $6,000 $6,416 INVESNTORY $5,000 $4,500 LONG TERM DEBT $15,000 $13,000 OWNERS EQUITY FIXED ASSETS COMMON STOCK $14,000 $16,500 NET FIXED ASSET(PLANT AND EQUIPMENT) $30,000 $31,500 RETAINED...
Which one of these is correct? Multiple Choice Depreciation has no effect on taxes. Interest paid...
Which one of these is correct? Multiple Choice Depreciation has no effect on taxes. Interest paid is a noncash item. Taxable income must be a positive value. Net income is distributed either to dividends or retained earnings. Taxable income equals net income divided by (1 + Average tax rate).
You would expect an increase in interest expense to______ the amount of taxes paid while an...
You would expect an increase in interest expense to______ the amount of taxes paid while an increase in dividends paid_________ the amount of taxes paid.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT