Answer :
When calculating income tax expense, taxable income of a corporation differs from pre-tax accounting income because of permanent differences but not reversible (temporary) differences.
Permanent differences are those that will never be recognized for tax purposes or will never be included in taxable income. Examples of permanent differences include tax-exempt income, fines and penalties not deductible for tax purposes, and certain expenses disallowed by tax regulations.
Reversible (temporary) differences, on the other hand, are timing differences that will eventually reverse and result in equal taxable and accounting amounts in the future. Examples of reversible differences include depreciation methods used for tax purposes and accounting purposes, deferred revenue, and certain types of expenses that are recognized differently for tax and accounting purposes.
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