What is the taxation treatment for 'Fines and penalties? Reading required: Learning objective 13.2: discuss differences in accounting treatments and taxation treatments for a range of transactions and events.Group of answer choicesNot deductible.A tax deduction on cash payment.An expense on accrual.An expense when payable.
Question
What is the taxation treatment for 'Fines and penalties? Reading required: Learning objective 13.2: discuss differences in accounting treatments and taxation treatments for a range of transactions and events.Group of answer choicesNot deductible.A tax deduction on cash payment.An expense on accrual.An expense when payable.
Solution
Fines and penalties are generally not tax deductible. This is because they are seen as a consequence of violating the law, and therefore, the government does not want to incentivize such behavior by allowing these costs to reduce taxable income. This treatment applies regardless of whether the fine or penalty is paid in cash, accrual, or payable. Therefore, the correct answer is "Not deductible."
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What is the taxation treatment for 'Fines and penalties? Group of answer choicesAn expense when payable.An expense on accrual.A tax deduction on cash payment.Not deductible
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