Answer (C) is correct.
A deferred tax asset records the deferred tax consequences attributable to
deductible temporary differences and carryforwards. Advance rental
receipts accounted for on the accrual basis for financial statement
purposes and on a cash basis for tax purposes would give rise to a
deferred tax asset. The financial statements would report no income and
no related tax expense because the rental payments apply to future
periods. The tax return, however, would treat the rent as income when
the cash was received, and a tax would be due in the year of receipt.
Because the tax is paid prior to recording the income for financial
statement purposes, it represents an asset that will be recognized as an
expense when income is finally recorded.