Employer contribution to an employee\'s pension benefits can be deducted as an e
ID: 2728871 • Letter: E
Question
Employer contribution to an employee's pension benefits can be deducted as an expense from taxable income only to a limit (the amount above that limit is not tax deductible). Any amount contributed above that limit is an example of an expense that is allowed by accounting standards but not permitted under tax laws. This situation results in a:
no difference.
permanent difference.
deferred tax liability.
temporary difference.
no difference.
permanent difference.
deferred tax liability.
temporary difference.
Explanation / Answer
The situation will result in a permanent difference because employer would never be able to take the tax benifit of the excess contribution in future.
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