A taxable temporary difference is a difference between the amount recognized for tax purposes and the amount recognized for book purposes, where the tax basis is lower than the accounting (book) basis.

A. An entity has incurred development costs which were fully deductible for tax purposes in that period. The costs were recognized as an intangible asset for book purposes.

This situation represents a deductible temporary difference, as the tax basis is higher than the book basis.

B. A product warranty liability is recognized for accounting purposes for 500, but deductible for tax purposes on a cash basis.

This scenario represents a taxable temporary difference because the expense is recognized for tax purposes in the period it is incurred, whereas for book purposes, it is recognized over a longer period.

C. An entity receives a non-taxable government grant of 1,000, of which 700 is deferred income that would be recognized in future years for accounting purposes.

This case represents a nontaxable item, not a taxable temporary difference.

D. Receipt of advance payments of 900 for subscription services to be provided in future years. Subscriptions are taxed on a cash basis.

This option does not represent a temporary difference, as it pertains to cash flows rather than differences in recognition for tax and book purposes.

Therefore, the correct answer representing a taxable temporary difference is:

B. A product warranty liability is recognized for accounting purposes for 500, but deductible for tax purposes on a cash basis.