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In calculating accounting income, a company deducted $8,525 in legal fess with regards to a building...

In calculating accounting income, a company deducted $8,525 in legal fess with regards to a building purchase.

What adjustment, if any, would be required in reconciling accounting income to income for tax purposes?

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Answer #1

As the company deducted $8,525 in the legal fees with regards to a building purchase will show an impact on the accounting income to income for tax purpose due to any legal fees paid on acquisition will be capitalised so by deducting $8,525 it minimises the value of the asset to that extent but not the accounting income. so as the value of asset is decrease so the amount of depreciation will be reduced to the extent of the diminution in the value of the asset. the value of asset should be adjusted for providing accurate income for income tax purpose.

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