Organizational Tax Research and Planning-Chapter 4

Organizational Tax Research and Planning-Chapter 4 -...

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Organizational Tax Research and Planning-Acc565 Problems C:4-28 a. What is Beach’s taxable income? Income: Gross profit from manufacturing operations $250,000 Dividends received 20,000 Interest Income (corporate bonds) 10,000 Net capital gain ______ 6,800_ Gross income $286,800 Minus: Administrative expenses $110,000 Bad debts 5,000 Depreciation 86,000 (201,000 ) $ 85,800 Charitable contribution ( 4,580) $ 81,220 Dividends-received deduction ( 16,000) NOL (carryover) ( 40,000) U.S. production activities deduction ( 1,500 ) Taxable income $ 23,720 b. What is Beach’s current E & P? Taxable Income $23,720.00 Tax Exemp t Interes t 12, 000.00 Life Insura nce Procee ds 100, 000.00 Depre ciation 44,0 00.00 NOL(c arryov er) 40,0 00.00 Divide nds 16, 000.00
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receiv ed U.S. produc tion activiti es 1,5 00.00 $213,500.0 0 Federa l Incom e Taxes $(3,55 8.00) Excess Charit able Contri bution s (3,42 0.00) Penalt y on federal Taxes (45 0.00) $(7,428.00) $229,792.0 0 C:4-33 Consequences of Multiple Cash Distributions Date Distr. Amt. Current E&P Accumulated E&P Dividend Income Return of Capital March 1 $ 60,000 $ 16,000 $ 30,000 $ 46,000 $ 14,000 Sept. 1 $ 90,000 $ 24,000 -0- $ 24,000 $ 66,000 Total $150,000 $ 40,000 $ 30,000 $70,000 $80,000 March 1 E&P allocated= 40,000*60,000/150,000 Sept. 1 40,000*90,000/150,000 What are the amount and character of Charles’ gain on his sale of stock to Donald?
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