Determine taxable income in each of the following instances. Assume that the cor
ID: 2587744 • Letter: D
Question
Determine taxable income in each of the following instances. Assume that the corporation is a C corporation and that book income is before any income tax expense.
Book income of $67,000 including capital gains of $4,900, a charitable contribution of $1,800, and meals and entertainment expenses of $6,000.
Book income of $109,000 including capital losses of $10,000, a charitable contribution of $20,500, and meals and entertainment expenses of $2,600.
Book income of $84,500 including municipal bond interest of $1,800, a charitable contribution of $5,700, and dividends of $4,400 from a 10% owned domestic corporation. The corporation also has an $7,600 charitable contribution carryover.
Book income of $146,000 including municipal bond interest of $2,000, a charitable contribution of $4,300, and dividends of $7,200 from a 70% owned domestic corporation. The corporation has a capital loss carryover of $5,300 and a capital gain of $2,600 in the current year.
Explanation / Answer
1 Taxable income is 67000+(6000*50%) = 70000. The capital gains and charitable contributions are not adjusted.Decductible travel and entertainment expense limited to 50% of the expense 2 Taxabble income is 109000+10000+6420+(2600*50%)=126720.Capital Loss are deductiable only to the extent of capital gain, so 10000 must be added back.Charitable contributions are limited to 10% of taxable income before charitable contribution so 109000+10000+1300+20500=140800, 140800*10% ,20500-14080 =6420 3 Taxable income 84500-1800 non taxable bond intrest income- 2832 charitable contribution adjustment-4400*70% for DRD = 76788 84500-1800-3080+5700 = 85320,85320*10% = 8532-5700 = 2832 4 Taxable income 146000-2000 non taxable bond intrest income-7200*80% for DRD- 2600 capital loss carry forward to offset current year capital gain = 135640
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