McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 39

Montcalm Corporation has total deferred tax assets of $3,000,000 at year-end.Of that amount, $1,000,000 results from the current expensing of an expenditure that the IRS might assert must be capitalized on audit.Management is trying to determine if it should not recognize the deferred tax asset related to this item under ASC 740.What confidence level must management have that the item will be sustained on audit before it can recognize any portion of the deferred tax asset under ASC 740?
a.Probable
b.More likely than not
c.Realistic possibility
d.Reasonable
e.More than remote