Generally,deductions for additions to reserves for estimated future costs (e.g. ,an allowance for estimated warranty costs)are not allowed for Federal income tax purposes because allowing the deduction would:
A)Result in a mismatching of revenues and expenses.
B)Violate established public policy.
C)Violate the economic performance requirement.
D)Violate the tax benefit rule.
E)None of these.

Question

Quizplus · Accepted Answer

Answer a.is incorrect because the reason for creating reserves is to better match revenues and expenses.Answer b.has nothing to do with the timing of income.Answer d.is incorrect because the tax benefit rule deals with the reporting of income and not the reporting of deductions.

Generally,deductions for Additions to Reserves for Estimated Future Costs (E