Jaeschbacker- AC430 Assignment-Unit 4

Jaeschbacker- AC430 Assignment-Unit 4 - a prior tax year...

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Joanna Aeschbacker Unit 4 Assignment Unit 4 Assignment The exercise listed below is found on page C:4-29 of Prentice Hall’s Federal Taxation 2011 . Complete the exercise and submit your work to the instructor. Water Corporation reports $500,000 of taxable income for the current year. The following additional information is available: For the current year, Water reports an $80,000 long-term capital loss and no capital gains. Taxable income includes $80,000 of dividends from a 10%-owned domestic corporation Water paid fines and penalties of $6,000 that were not deducted in computing taxable income In computing this year’s taxable income, Water deducted a $20,000 NOL carryover from
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Unformatted text preview: a prior tax year. • Water claimed a $10,000 U.S. production activities deduction • Taxable income includes a deduction for $40,000 of depreciation that exceeds the depreciation allowed for E&P purposes. Assume a 34% corporate tax rate. What is Water’s current E&P for the year? $500,000-$80,000 capital loss +$56,000 (70% of $80,000 dividends) Dividends received deduction-$6,000 fines +$20,000 NOL deduction +$10,000 US Productions Activities deduction +$40,000 excess depreciation-$170,000 income taxes ($500,000 x 34% corporate tax rate) $370,000 is the E and P for the current year...
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