Chapter 5 - 12 Month Year Taxable Income 7 Month Year...

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12 - Month Year 7 - Month Year Taxable Income 120,000 70,000 Tax on 15% 7,500 7,500 25% 6,250 5,000 34% 8,500 39% 7,800 tax 30,050 12,500 Average Tax 25.04% 17.86% 17,529.17
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7- Month Year Taxable Income 70,000 Multiplied by inflation factor (12 months / 7 months) 1.7143 Annualized Income 120,000 Tax on annualized income 30,050 Multiplied by deflation factor (7 months / 12 months) 0.5833 Total tax 17,529 Average Tax 25.04%
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Book income before tax 4,712,000 -114,000 386,400 -767,000 Adjusted book income 4,217,400 Tax rate 34% Tax expense per books 1,433,916 less income never recognized add expenses never deducted less deduction never expensed
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Book Income Difference Year 1 100,000 60,000 40,000 13,600 Year 2 - 35,000 -35,000 -11,900 Year 3 - 5,000 -5,000 -1,700 TOTAL 100,000 100,000 - - Taxable Income Tax Cost / Savings
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Year 1 Tax Expense Tax Payable Bank Deferred Taxes 34,000 34,000 20,400 20,400 13,600 13,600 balance 34,000 - - 20,400 13,600 Year 2 Tax Expense Tax Payable Bank Deferred Taxes OB 13,600 11,900 11,900 11,900 11,900 balance - - - 11,900 1,700 Year 3 Tax Expense Tax Payable Bank Deferred Taxes OB 1,700 1,700 1,700 1,700 1,700 balance - - - 1,700 -
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Year 1 Tax Expense Tax Payable Bank Deferred Taxes balance - - - - - Year 2 Tax Expense Tax Payable Bank Deferred Taxes - balance - - - - - Year 3 Tax Expense Tax Payable Bank Deferred Taxes - balance - - - - -
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Year 1
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