In 2011, Star Corporation reports gross income of $200,000 (including $150,000 o
ID: 2473594 • Letter: I
Question
In 2011, Star Corporation reports gross income of $200,000 (including $150,000 of profit from its operations and $50,000 in dividends from less-than-20%-owned domestic corporations) and $220,000 of operating expenses. Star’s 2009 taxable income (all ordinary income) was $75,000, on which it paid taxes of $13,750.
What is Star’s net operating loss for 2011?
What is the amount of Star’s tax refund Star carries back the 2011 net operating loss to 2009?
Assume that Star expects 2012’s taxable income to be $400,000. Ignore the U.S. production activities deduction. What election could Star make to increase the tax benefit (if any)? Assume a 10% discount rate as a measure of the time value of money.
Explanation / Answer
1.
Star’s net operating loss for 2011:
Thus,
Star’s net operating loss for 2011 is $ 70,000.
2.
Statement of Tax Refund:
Thus,
Total $ 12,831 is the amount of Star’s tax refund Star carries back the 2011 net operating loss to 2009.
Working:
Particulars Amount($) Profit from operation A 1,50,000.00 Opearting Expenses B 2,20,000.00 Net opearating Loss B-A 70,000.00Related Questions
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