The following information pertains to Lumis Corporation\'s operations for the ye
ID: 2438515 • Letter: T
Question
The following information pertains to Lumis Corporation's operations for the year:
Operating income $500,000
Capital gain 100,000
Capital loss (250,000)
Dividend income (< 20% owned) 50,000
Tax-free municipal bond interest income 50,000
In addition to the above, Lumis had made charitable contributions in the preceding year that could not be deducted due to the 10% of TI limit in the amount of $15,000, which were carried over to the current taxable year for deduction, if allowed.
1) How much taxable income does Lumis report on its form 1120, Corporate Income Tax Return?
2) What is Lumis' current earnings & profits for the current year?
3) Assume that Lumis' taxable income is $600,000 (not the correct answer for the first part above). What is Lumis Corporation's income tax liability?
Explanation / Answer
1.
2. Current Earnings/Profit = Operating Income + Divident Income + Interest Income = $(500,000+50,000+50,000) = $600,000
3. Lumis' Taxable Income is $600,000. Tax liabilty for income below $1,000,000 is 29%.
Thus, tax liability = 29% * $600,000 = $174,000
Particulars Amount ($) Gains Operating Income 500,000 Capital Gain 100,000 Dividend Income 50,000 Tax-free Municipal Bond Interest Income 50,000 Total Income 700,000 Expenses Capital Loss 250,000 Charitable Contributions (from prev. year) 15,000 Total Expenses 265,000 Taxable Income 435,000Related Questions
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