> Since, the amount of legal services had increase to $28,000 which increase the organizational expenditures, the total became $52,000 which exceed the organizational expenditures resulting to first year expensing limit to only $3,000 [$5,000-(52,000-50,000)]. So, the total deduction for organizational expenditures would be $4,633.Expenses of Temporary Directors and Organizational Meetings $21,000Fee Paid to State of Incorporation3,000Legal Services for Drafting the Corporate Charter and Bylaws28,000Total Organization Expenditures$52,000Less: Immediate Expenses(3,000)Total Deduction for Organizational Expenditures$3,544
[$3,000 + ($52,000 - $3,000) / 180 months x 2 months]45. Egret Corporation, a calendar year Ccorporation, was formed on March 6, 2018, andopened for business on July 1, 2018. After itsformation but prior to opening for business, Egretincurred the following expenditures: a)What’s max amount of these expenditures Egretcan deduct in 2018? $7,000 + $14,500 + $11,000 + $8,000 + $1,000 = $41,500 Total Expense> If Egret elects to make $195 election, then Egret can deduct $5,000 immediately and can amortize remaining expense in 180 months installment beginning with period in which business startsDeduction = [$5,000 + ($41,500 - $5,000) * 6/180] > = $6,217 47. The following info for 2018 relates to Sparrow Corporation, a calendar year,accrual method taxpayer.Net income per books (after-tax)$205,050Federal income tax expense per books55,650Tax-exempt interest income4,500MACRS depreciation in excess of straight-line depreciation used for financial statement purposes7,200Excess of capital loss over capital gains9,400Nondeductible meals and entertainment5,500Interest on loan to purchase tax-exempt bonds1,100Based on the above information, use Schedule M–1 of Form 1120, which is available on the IRS website, to determine Sparrow’s taxable income for 2018.Net income per books (after-tax)$205,050Add: Items that decrease net books, but have no effect on taxable incomeFederal Income Tax55,650Excess Charitable Contributions9,400Interest Paid on Loan1,100Premiums Paid on Policy5,500$71,650$276,700Less: Items that increased net income, but no effect on taxable incomeTax-Exempt Interest Income4,500Excess of MARCS over Book Depreciation7,200(11,700)Taxable Income$265,000Accounting $7,000Advertising14,500Employee Payroll11,000Rent8,000Utilities1,000
You've reached the end of your free preview.
Want to read all 10 pages?
- Spring '16
- Accounting, Taxation in the United States