illac Square Corporation determined that $1,123,800 of its research and development tax credit on its current-year tax return was uncertain, but that it was more likely than not to be sustained on audit. Management made the following assessment of the company’s potential tax benefit from the deduction and its probability of occurring. Potential Estimated Benefit (000s)
Cadillac Square Corporation determined that $1,123,800 of its research and development tax credit on its current-year tax return was uncertain, but that it was more likely than not to be sustained on audit. Management made the following assessment of the company’s potential tax benefit from the deduction and its probability of occurring.
| Potential Estimated Benefit (000s) | Individual Probability of Occurring (%) | Cumulative Probability of Occurring (%) |
|---|---|---|
| $ 1,123,800 | 44 | 44 |
| 917,050 | 24 | 68 |
| 243,550 | 20 | 88 |
| 0 | 12 | 100 |
What amount of the tax benefit related to the uncertain tax position from the research and development tax credit can Cadillac Square Corporation recognize in calculating its income tax provision in the current year?
A tax benefit is a provision in a tax law that assists taxpayers in reducing their tax liabilities. Tax breaks are frequently used as a form of incentive to encourage responsible behavior or commercial activity. Among the available benefits are deductions, credits, exclusions, and exemptions. Programs for families, education, employees, and natural disasters are examples of benefits. Tax breaks are made possible by tax legislation enacted by the federal, state, and local governments. As previously stated, tax breaks come in a variety of shapes and sizes, assisting individuals and businesses in lowering their overall tax bill.
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