Misconception · MIS:valuation-allowance-fixes-uncertain-position

Mistaken idea “A valuation allowance fixes an uncertain tax position”

Mistaken reasoning: This mistake combines two Topic 740 thresholds.

Updated Aug 21, 2026 Review due Nov 8, 2026

Why this is mistaken

First apply uncertain-position recognition and measurement. Apply a valuation allowance only to recognized deferred tax assets and realization evidence.

Where to watch

When this mistake may appear

  • A deduction is both uncertain and related to a deferred tax asset.
Check your work

Your work may contain this mistake if:

  • Recognize the full position, then offset it with a valuation allowance.