Business_taxation_solutions_Chpt 6

Business_taxation_solutions_Chpt 6 - Week 3 Assignment...

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Week 3 Assignment Chapter 6 3. a. Because the property and casualty insurance premium is deductible, the after-tax cost is $3,640 ($5,600 – [$5,600 × 35%]). b. Because the fine is nondeductible, the after-tax cost is $1,200. c. Because the life insurance premium is nondeductible, the after-tax cost is $3,700. d. Because the political contribution is nondeductible, the after-tax cost is $50,000. e. Because only 50 percent of the entertainment expense is deductible, the after-tax cost is $6,435 ($7,800 – [$3,900 × 35%]). 4. Northwest Company is allowed a domestic production activities deduction equal to 6% of net income generated by the Portland plant. Consequently, its taxable income is computed as follows. Net income from Portland plant $3,100,000 Net income from Vancouver plant 4,800,000 Domestic production activities deduction (6% × $3,100,000) (186,000 ) Taxable income $7,714,000 5. a. $22 taxable income. Although Firm B received $522 cash, the $500 principal repayment was a nontaxable return of investment. Only the $22 interest is income. b.
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Business_taxation_solutions_Chpt 6 - Week 3 Assignment...

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