What are Deferred Tax Liabilities?
Deferred tax liabilities occur due to “temporary differences” that will create a tax burden for future periods. For example, assume that company xyz purchases office space and uses an accelerated method of depreciation in comparison to what the tax code allows. Essentially, company xyz is assuming tax benefits in advance of what the tax code calls for. Company xyz will now increase their deferred tax liability account and have to pay up down the road when the tax value of the asset becomes higher than the accounting value. Companies may prefer DTLs if they are strapped for cash or if they believe that they can do more with the money now and make up the tax differences in the future and then some. Deferred tax assets, on the other hand, occur AFTER expenses are deducted for accounting purposes. A good example of this can be seen with capital loss carryover. For instance, assume a corporation has $100,000 in capital losses and also assume that the tax code only allows for a $3,000 tax de
