Under U.S. GAAP, an entity cannot recognize a tax benefit for a tax position in its financial statements unless it is more likely than not that the position will be sustained upon examination solely on the basis of technical merits. In making this determination, an entity must assume that (1) the position will be examined by a taxing authority that has full knowledge of all relevant information and (2) any dispute will be taken to the court of last resort. If the recognition threshold is not met, no benefit can be recognized in the financial statements.
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