Bruin Company received a $100,000 insurance payment on the death of its company president. The company annually paid $1,000 of nondeductible insurance premiums on the policy. Bruin reported the insurance receipt as income and deducted the premium payments on its books. For ASC 740 purposes, the income and deduction are characterized as:

Question

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The insurance receipt is a favorable permanent difference because it is income that is recognized for book purposes but is not taxable. The premium payments are an unfavorable permanent difference because they are expenses that are deducted for book purposes but are not deductible for tax purposes.

Bruin Company Received a $100,000 Insurance Payment on the Death