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A company inquired whether it could deduct expenses from previous years recorded via a reserve adjustment due to an accounting error. The DGT ruled that if the expense pertains to a financial year that has already lapsed, it is not deductible, in order to prevent a lower tax liability than what would have been due.
Companies cannot use accounting adjustments to bypass the statute of limitations on tax deductions for prior-year expenses.
The tax team reviews your specific situation.
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