Everwood Co. had net income of $1,000,000 for the year ending December 31, 2018, its first year of operations. During this time period, Everwood also had a permanent tax difference of $120,000 and its adjusted pre-tax book income is $1,220,000. Analysts have approximated Everwood's taxable income at $735,000 for the year ending December 31, 2018. Which of the following most likely caused the difference between Everwood's book and tax income?
A. A net operating loss carryback.
B. Premiums paid on life insurance on key executives where the company is the beneficiary.
C. Purchases of long-lived capital assets.
D. Accrued warranty expenses not yet deductible on the tax return.
Answer: C
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