Early this year, ZeZe Inc. paid a $52,000 legal fee in connection with a disputeover ZeZe’s title to investment land. ZeZe’s auditors required the corporation toexpense the payment on this year’s financial statements. According to ZeZe’s taxadviser, the payment is a nondeductible capital expenditure. ZeZe’s tax rate is 35 per cent.
a. Compute the deferred tax asset or a deferred tax liability (identify which)resulting from this difference in accounting treatment.
b. When will the temporary difference reverse?
