If a corporation's cash charitable contributions exceed the charitable contribution deduction limit, what kind of book-tax difference is created?
A) Temporary; favorable.
B) Temporary; unfavorable.
C) Permanent; unfavorable.
D) Permanent; favorable.

Question

Quizplus · Accepted Answer

When a corporation's cash charitable contributions exceed the charitable contribution deduction limit, a temporary book-tax difference is created. This is because for financial accounting purposes, the corporation can recognize the full amount of the charitable contribution as an expense, while for tax purposes, the deduction is limited to a percentage of the corporation's taxable income. This results in a temporary unfavorable book-tax difference, as the corporation will pay higher taxes in the current period but will receive the full deduction in a future period.

If a Corporation's Cash Charitable Contributions Exceed the Charitable Contribution