General accounting Apricot, Inc., has accumulated earnings and profits at the end ofthe year of $275,000. Apricot pays a salary and bonus of$200,000 to Donald, its CEO. Apricot's taxable income beforethe salary and bonus is $225,000. The IRS classifies $75,000 ofthe salary and bonus as unreasonable. Calculate Apricot'staxable income after the reclassification.a. $25,000b. $100,000c. $125,000d. $225,000e. None of the above

Step 1: DefinitionThe IRS reclassifies unreasonable compensation as a non-deductible expense,…

Answered: Apricot, Inc., has accumulated earnings…

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter12: Corporations: Organization, Capital Structure, And Operating Rules

Section: Chapter Questions

Problem 40P

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Similar questions

Grevilla Corporation is a manufacturing company. The corporation has accumulated earnings of $950,000, and it can establish reasonable needs for $400,000 of that amount. Calculate the amount of the accumulated earnings tax (if any) that Grevilla Corporation is subject to for this year. $_____________
In the current year, Madison Corporation had 50,000 of taxable income at a tax rate of 25%. During the year, Madison began offering warranties on its products and has a Warranty liability for financial reporting purposes of 5,000 at the end of the year. Warranty expenses are not deductible until paid for income tax purposes. Prepare the journal entry to record Madisons income taxes at the end of the year.
How do the all events and economic performance requirements apply to the following transactions by an accrual basis taxpayer? a. The company guarantees its products for six months. At the end of 2019, customers had made valid claims for 600,000 that were not paid until 2020. Also, the company estimates that another 400,000 in claims from 2019 sales will be filed and paid in 2020. b. The accrual basis taxpayer reported 200,000 in corporate taxable income for 2019. The state income tax rate was 6%. The corporation paid 7,000 in estimated state income taxes in 2019 and paid 2,000 on 2018 state income taxes when it filed its 2018 state income tax return in March 2019. The company filed its 2019 state income tax return in March 2020 and paid the remaining 5,000 of its 2019 state income tax liability. c. An employee was involved in an accident while making a sales call. The company paid the injured victim 15,000 in 2019 and agreed to pay the victim 15,000 a year for the next nine years.
B Corporation, a calendar year-end, accrual basis taxpayer, is owned 75 percent by Bonnie, a cash basis taxpayer. On December 31,2019, the corporation accrues interest of $4,000 on a loan from Bonnie and also accrues a $15,000 bonus to Bonnie. The bonus is paid to Bonnie on February 1,2020; the interest is not paid until 2021 . How much can B Corporation deduct on its 2019 tax return for these two expenses? $0 $4,000 $15,000 $19,000 $12,000
Troy, a cash basis taxpayer, is employed by Eagle Corporation, also a cash basis taxpayer. Tray is a full-time employee of the corporation and receives a salary of 60,000 per year. He also receives a bonus equal to 10% of all collections from diems he serviced during the year. Determine the tax consequences of the following events to the corporation and to Troy: a. On December 31, 2019, Troy was visiting a customer. The customer gave Troy a 10,000 check payable to the corporation for appraisal services Troy performed during 2019. Troy did not deliver the check to the corporation until January 2020. b. The facts are the same as in part (a), except that the corporation is an accrual basis taxpayer and Troy deposited the check on December 31, but the bank did not add the deposit to the corporations account until January 2020. c. The facts are the same as in part (a), except that the customer told Troy to hold the check until January 2020 when the customer could make a bank deposit that would cover the check.
Ironwood Corporation has ordinary taxable income of $65,000 in 2019, and a short-term capital loss of $15,000. What is the corporation's tax liability for 2019? $7,500 $5,250 $10,500 $13,650 None of the above
Last year Aleshia identified 15,000 as a nonbusiness bad debt. In that tax year, before considering the tax implications of the nonbusiness bad debt, Aleshia had 100,000 of taxable income, of which 12,000 consisted of short-term capital gains. This year Aleshia collected 8,000 of the amount she had previously identified as a bad debt. Determine Aleshias tax treatment of the 8,000 received in the current tax year.

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