Joined: 19 Nov 2011 Location: United States
Online Status: Offline Posts: 68
Posted: 31 Jul 2012 at 16:40 | IP Logged
Hi,
No 1:
There is a difference between book income and taxable
income. The reconciliation is called M1. You take the
Book income and + or - those that do not belong to
taxable income.
Since it is a related corp dividends you have to deduct
70% of $50,000 dividend income because otherwise there
will be triple taxation.
Then they say that this 300,000 book income also includes
a deduction for bad debt allowance method. Tax only
permits direct method for bad debt and not allowance
method. Therefore this deduction is not allowed for tax
purposes. You have to add it back to the book income
Joined: 19 Nov 2011 Location: United States
Online Status: Offline Posts: 68
Posted: 31 Jul 2012 at 16:47 | IP Logged
No 2:
For Corporations you are allowed to deduct charitable
contributions up to 10% of Taxable income before any
deductions (NOL, Capital loss, Qualified production,
charitable, dividends received deductions -if any of
these were deducted from the taxable income you need to
add them back to the taxable income and then calculate
10% limit).
They say that taxable income before charitable
contributions was $820,000 but this included $40,000
dividends received deduction. Therefore you have to add
it back to the taxable income $820K+$40K = $860K correct
taxable income for charitable contribution limitation
calculation. 10% x 860,000 = $86,000 is the maximum
charitable deduction you can have this year.
They had $10,000 carryover and $80,000 this year's
charitable contribution and it totals $90,000. You can
only deduct $86,000 and rest $4,000 is carried over for 5
years.
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Topic: R3- Can any body solve these ?
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