The Tax Questions Blog

Question: accounting help! which of the following is an example of a permanent difference between taxable income and?

reported income?

a. using the straight-line depreciation method for income statement reporting and MACRS depreciation for taxable income
b. using the straight-line depreciation method for taxable income and MACRS depreciation for income statement reporting
c. including tax-exempt municipal bond interest in net income and not including any tax-exempt municipal bond interest in taxable income
d. using the installment method of determining revenue for taxable income and recognizing revenue when the sale is made for income statement reporting

Answer: C. Permanent differences never reverse - so tax exempt income will never be taxed therefore it is permanent.

Temporary differences are items that will reverse over time. All the other items described are depreciation and temporary in nature.

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