(TCO 6) Deer Corporation was acquired last year by Lobo Corporation in a transaction causing an
ownership change. At the time of the acquisition, the fair market value of Deer was $1.5 million and the
Federal long-term tax-exempt rate was 5%. In the current year, Lobo has $600,000 of taxable income and
excess credits carryovers from Deer amounting to $40,000. What is Lobo’s Federal income tax for the
year if Lobo is in the 34% tax bracket?
None of the above.
Lobo’s tax before credits is $204,000 ($600,000 X 34%). The § 382 limitation for the current year is
$75,000 ($1.5 million X 5%). The § 382 limitation credit equivalent is $25,500 ($75,000 X 34%).
Therefore, Lobo’s tax liability for the current year is $178,500 ($204,000 – $25,500).
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(TCO 6) ParentCo's separate taxable income was $350,000, and SubCo's was $225,000. Consolidated
taxable income before contributions was $400,000. Charitable contributions made by the affiliated group
included $15,000 by ParentCo and $20,000 by SubCo. Compute the group's charitable contribution