Under MACRS depreciation, a corporation may receive a tax benefit in the current year which is higher than the deduction reflected on the financial statements causing deferred taxes payable to increase.

Question

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MACRS (Modified Accelerated Cost Recovery System) depreciation is a tax depreciation method that allows for larger tax deductions in the early years of an asset's life. As a result, the tax benefit received in the current year may be higher than the deduction reflected on the financial statements. This could cause deferred taxes payable to increase, as the temporary difference between the tax and book depreciation methods results in deferred tax liability.

Under MACRS Depreciation, a Corporation May Receive a Tax Benefit