Volume 14, No. 10

 

Uncertain About Taxes? Maybe This Will Help  When it comes to taxes, the human mind does not always act in the most rational economic fashion. Tax-advantaged financial products seem to frequently strike a chord with individuals and corporations; sometimes, the phrase is like Pavlov's bell causing a salivary response in his dog. Hopes for a tax advantage can entice otherwise sober individuals to make investments they'd otherwise forgo; likewise, for some corporate treasurers and chief financial officers. In a tax system founded on self-reporting of income, there are plenty of chances for those Pavlovian corporate types to report their most pessimistic point of view to the taxing authorities, and their most optimistic point of view to their shareholders - even when they don't believe their pessimistic tax-reporting view will withstand scrutiny. Accounting standards don't provide a framework for presenting uncertain tax positions in a consistent fashion across companies - leading to uneven comparisons. The FASB offers a proposal for leveling the accounting for uncertain tax positions.

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