Timex Corporation reports the following results for the current year: Gross prof

Question

Timex Corporation reports the following results for the current year:

Gross profits on sales                                                             $150,000

Dividends from less than 20% owned domestic corporation $30,000

Operating expenses                                                               $75,000

Charitable contributions in cash                                                        $13,000

What is Timex’s charitable contribution deduction for the current year and is there a charitable contribution carryover available to the following year?

What is Timex’s taxable income for the current year assuming qualifies production activities income is $30,000

Explanation / Answer

Pace Corporation's taxable income:

Gross profits $120,000

Dividends (more than 20%-owned corporations) 30,000

Gross income $150,000

Minus: Operating expenses ( 65,000)

Adjusted taxable income $ 85,000

Minus: Charitable contribution deduction (0.10 x $85,000) ( 8,500)

Taxable income before the dividends-received deduction $ 76,500

Minus: Dividends-received deduction (0.80 x $30,000) ( 24,000)

Taxable income before the U.S. production activities income $ 52,500

Minus: U.S. production activities deduction ($52,500 x 0.03) ( 1,575)

Taxable income $ 50,925

Pace Corporation's regular tax liability [$7,500 + (0.25 x $925)] $ 7,731

b)

Pace Corporation has a $1,500 ($10,000 - $8,500) charitable contribution carryover to the next five years. Pace also has a $15,000 ($10,000 + $5,000) capital loss that it can carry back three years and forward five years as a short-term capital loss

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