/n2. Client B wants to engage us to perform some tax planning if corporate tax rates end up increasing next year. Client B thinks there is an opportunity to defer a deduction expensed for GAAP in 2024 and deduct the amount for tax purposes on its 2025 tax return at a higher tax rate. We did some preliminary research for Client B and although there is some tax guidance out there that may allow Client B to defer this deduction until 2025 for tax purposes, the tax return position would not meet the more likely than not standard. We will need to explain the following to Client B as part of our tax planning project: a. What is the more likely than not standard that is required to record a tax benefit on Client B's financial statements? Please also give one example of when the more likely than not standard has not been met. b. If Client B establishes a UTB liability for this tax position what are two scenarios that would allow for this UTB liability to be derecognized (reversed) in the financial statements at a future date? c. Would Client B need to consider computing interest and penalties on the UTB liability under any of the following 3 scenarios (yes or no response): i. No NOLS or tax prepayments exist to cover the additional tax resulting from the UTB liability if challenged and disallowed by the IRS. ii. NOLS exist to cover the additional tax resulting from the UTB liability if challenged and disallowed by the IRS. iii. Tax prepayments exist to cover the additional tax resulting from the UTB liability if challenged and disallowed by the IRS.

Fig: 1