The estimated current values of Lane’s personal assets at December 31, year 1, totaled $1,000,000, with tax bases aggregating $600,000. Included in these assets was a vested interest in a deferred profit-sharing plan with a current value of $80,000 and a tax basis of $70,000. The estimated current amounts of Lane’s personal liabilities equaled their tax bases at December 31, year 1. Lane’s year 1 effective income tax rate was 30%. In Lane’s personal statement of financial condition at December 31, year 1, what amount should be provided for estimated income taxes relating to the excess of current values over tax bases?
a.$120,000
b.$117,000
c.$3,000
d.$0
Answer:A
Choice”a” is correct. Per ASC Topic 274, estimated taxes that would be paid if all the assets were converted to cash and all the liabilities were paid should be included with the liabilities. Thus, $120,000 [($1,000,000 – $600,000) × 0.30] should be provided for estimated income taxes relating to the excess of current values over tax bases.