30,000. Use Exhibit 16-6. Gross profit from inventory sales of $310,000 (no book–tax differences). Dividends HC received from 28 percent-owned corporation of $120,000 (this is also HC’s pro rata share of the corporation’s earnings). Expenses other than DRD, charitable contribution (CC), and net operating loss (NOL) are $300,000 (no book–tax differences). NOL carryover from prior year of $12,000. Cash charitable contribution of $50,000. Assume the charitable donation is not a qualified contribution because HC Incorporated did not make the necessary election. Compute HC Incorporated’s current-year taxabl
Compute HC Incorporated’s current-year taxable income given the following information relating to its 2021 activities. Also, compute HC’s Schedule M-1 assuming that HC’s federal income tax expense for book purposes is $30,000. Use Exhibit 16-6.
- Gross profit from inventory sales of $310,000 (no book–tax differences).
- Dividends HC received from 28 percent-owned corporation of $120,000 (this is also HC’s pro rata share of the corporation’s earnings).
- Expenses other than DRD, charitable contribution (CC), and net operating loss (NOL) are $300,000 (no book–tax differences).
- NOL carryover from prior year of $12,000.
- Cash charitable contribution of $50,000. Assume the charitable donation is not a qualified contribution because HC Incorporated did not make the necessary election.
Compute HC Incorporated’s current-year taxable income given the following information relating to its 2021 activities. (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)
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Book Income (Dr) CR |
Book-tax adjustments (DR) |
Book-tax adjustments CR |
Taxable Income (Dr) CR |
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Gross Profit |
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Other Income |
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Dividend Income |
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Gross Income |
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Expenses: |
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Business expenses other than DRD, CC, and NOL |
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Federal Income tax expense |
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Total expenses before charitable contribution, NOL, and DRD deduction |
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Income before charitable contribution, NOL, DRD |
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NOL carryover from prior year |
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Taxable income for charitable contribution limitation purposes (modified taxable income) |
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Charitable contributions |
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Taxable income before DRD |
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Dividends received deduction DRD |
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Book Taxable income |
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Compute HC’s Schedule M-1 assuming that HC’s federal income tax expense for book purposes is $30,000.
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6. Total |
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7. Income recorded on books this year not included on this return 9itemize) |
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Tax-exempt interest: |
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8. Deductions on this return not charged against book income this year (itemize) |
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b. Charitable contributions |
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9. Income |
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Taxable income refers to the concept of determining the desired sum of tax an entity needs to pay to the government on the basis of the total income gained by them.
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