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Income Tax Effect of Non-recurring Gains or Losses
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    Question: Certain items are recorded directly in Account 434, Miscellaneous Credits to Surplus, and Account 435, Miscellaneous Debits to Surplus, respectively. With respect to items credited to surplus, the uniform system provides that the tax consequences of such items shall be treated as charges to Account 435. However, the uniform system is silent on whether the tax consequences of items charged to Account 435 should be credited to Account 434. What is the proper accounting treatment of the tax effect of items charged to Account 435?

    Answer: Although Account 434 is silent on the matter of tax consequences of items charged to account 435, the tax effect of such debits are properly credited to Account 434.

    Arthur L. Litke
    Chief Accountant

    Effective: March 13, 1967



Updated: June 28, 2010