Which of the following is true concerning the corporate taxation of insurance premiums and the treatment of uninsured losses?
A)both premiums and expected losses are deductible at the beginning of the year
B)uninsured losses are deductible only when they occur and premiums are deductible in the year paid
C)since payments for insured losses are 100% tax deductible, commercial insurance is economically inefficient
D)losses paid under the deductible amount are not tax deductible because the insured assumed the losses

Question

Quizplus · Accepted Answer

Uninsured losses are deductible only when they occur, while premiums are generally deductible in the year in which they are paid. This means that a company can deduct premiums from its taxable income before it knows the amount of losses it will incur during the year. However, uninsured losses must be deducted in the year they are incurred, which may result in a timing difference that affects a company's cash flow.

Which of the Following Is True Concerning the Corporate Taxation