Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 12, Problem 17AP
To determine
Compute the personal holding company tax owed by Corporation L.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The following information pertains to Entiguan Sports for the 2006 year-end. The treatment
of items for accounting and tax purposes is based on fi ctitious accounting and
tax standards and is not specifi c to a particular jurisdiction. Calculate the tax base and
carrying amount for each item.
1. Donations: Entiguan Sports made donations of €100,000 in the current fi scal year.
The donations were expensed for fi nancial reporting purposes, but are not tax deductible
based on applicable tax legislation.
2. Interest received in advance: Entiguan Sports received in advance interest of €300,000.
The interest is taxed because tax authorities recognize the interest to accrue to the
company (part of taxable income) on the date of receipt.
3. Rent received in advance: Entiguan recognized €10 million for rent received in advance
from a lessee for an unused warehouse building. Rent received in advance is
deferred for accounting purposes but taxed on a cash basis.
4. Loan : Entiguan Sports secured…
During a recent IRS audit, the revenue agent decided that the Parker family used their closely held corporation, Falco, to avoid shareholder tax by accumulating earnings beyond the reasonable needs of the business. Falco’s taxable income was $1,010,000, it paid no dividends, and it had no business need to retain income. Falco’s marginal tax rate in prior years was 34 percent.
Required:
Compute Falco’s accumulated earnings tax assuming that it had accumulated $5 million after-tax income in prior years.
Compute Falco’s accumulated earnings tax assuming that it had accumulated $141,000 after-tax income in prior years.
Multiple Choice
$200,933
$174,983
$208,433
$172,509
Chapter 12 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 12 - Mr. and Mrs. Velotta are self-employed...Ch. 12 - Prob. 2QPDCh. 12 - Ms. Johnson is eager to create a family...Ch. 12 - Discuss the tax and nontax reasons why the stock...Ch. 12 - Mr. Eros operates an antique store located on the...Ch. 12 - Prob. 6QPDCh. 12 - Prob. 7QPDCh. 12 - Prob. 8QPDCh. 12 - Prob. 9QPDCh. 12 - Prob. 10QPD
Ch. 12 - Prob. 11QPDCh. 12 - Ms. Knox recently loaned 20,000 to her closely...Ch. 12 - Explain the logic of the tax rate for both the...Ch. 12 - Prob. 14QPDCh. 12 - Prob. 15QPDCh. 12 - Prob. 16QPDCh. 12 - Mr. Tuck and Ms. Under organized a new business as...Ch. 12 - Grant and Marvin organized a new business as a...Ch. 12 - Prob. 3APCh. 12 - Ms. Kona owns a 10 percent interest in Carlton...Ch. 12 - Mrs. Franklin, who is in the 37 percent tax...Ch. 12 - Prob. 6APCh. 12 - Prob. 7APCh. 12 - Prob. 8APCh. 12 - Prob. 9APCh. 12 - Prob. 10APCh. 12 - Prob. 11APCh. 12 - Prob. 12APCh. 12 - Prob. 13APCh. 12 - Ms. Xie, who is in the 37 percent tax bracket, is...Ch. 12 - Prob. 15APCh. 12 - In 1994, Mr. and Mrs. Adams formed ADC by...Ch. 12 - Prob. 17APCh. 12 - Prob. 18APCh. 12 - Prob. 19APCh. 12 - Prob. 20APCh. 12 - Prob. 21APCh. 12 - Prob. 1IRPCh. 12 - Prob. 2IRPCh. 12 - Prob. 3IRPCh. 12 - REW Inc. is closely held by six members of the REW...Ch. 12 - Prob. 5IRPCh. 12 - Prob. 6IRPCh. 12 - Prob. 7IRPCh. 12 - Prob. 8IRPCh. 12 - Prob. 9IRPCh. 12 - Prob. 10IRPCh. 12 - Prob. 2TPCCh. 12 - Prob. 3TPC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Which of the following statements is incorrect? A calendar year corporation must file its tax return no later than March 15 of the following year. C corporations must annually file a Form 1120 tax return. A corporation with average annual gross receipts of $30 million must use the accrual basis of accounting. A corporation can choose the fiscal year-end of its choice when it files its first tax return without approval of the IRS.arrow_forwardDuring a recent IRS audit, the revenue agent decided that the Parker family used their closely held corporation, Falco, to avoid shareholder tax by accumulating earnings beyond the reasonable needs of the business. Falco’s taxable income was $880,000, it paid no dividends, and it had no business need to retain income. Falco's marginal tax rate in prior years was 34 percent. Assume the accumulated earnings tax rate is 20% for all applicable years in this problem. Required: Compute Falco’s accumulated earnings tax assuming that it had accumulated $4 million after-tax income in prior years. Assume that for these years at issue, a corporation is exempt up to $250,000 of accumulated earnings without demonstrating a reasonable business need for the accumulation. Compute Falco’s accumulated earnings tax assuming that it had accumulated $128,000 after-tax income in prior years. Assume that for these years at issue, a corporation is exempt up to $250,000 of accumulated earnings without…arrow_forwardTh e following information pertains to Entiguan Sports for the 2006 year-end. Th e treatment of items for accounting and tax purposes is based on fi ctitious accounting andtax standards and is not specifi c to a particular jurisdiction. Calculate the tax base andcarrying amount for each item.1 . Donations : Entiguan Sports made donations of €100,000 in the current fi scal year.Th e donations were expensed for fi nancial reporting purposes, but are not tax deductible based on applicable tax legislation.2 . Interest received in advance : Entiguan Sports received in advance interest of €300,000.Th e interest is taxed because tax authorities recognize the interest to accrue to thecompany (part of taxable income) on the date of receipt.3 . Rent received in advance : Entiguan recognized €10 million for rent received in advance from a lessee for an unused warehouse building. Rent received in advance isdeferred for accounting purposes but taxed on a cash basis.4 . Loan : Entiguan Sports…arrow_forward
- On its year 1 financial statements, Seatax Corporation, an accrual-method taxpayer, reported federal income tax expense of $570,000. On its year 1 tax return, it reported a tax liability of $650,000. During year 1, Seatax made estimated tax payments of $700,000. What book-tax difference, if any, associated with its federal income tax expense should Seatax have reported when computing its year 1 taxable income? Is the difference favorable or unfavorable? Is it temporary or permanent? Year 1 Book-tax Difference Favorable or Unfavorable Temporary or Permanentarrow_forwardGosling, Inc., a calendar year, accrual basis corporation, reported $756,000 net income after tax on its financial statements prepared in accordance with GAAP. The corporation's financial records reveal the following information: Gosling earned $3,500 on an investment in tax-exempt municipal bonds. Gosling received an advance payment of rent this year for $25,000. This amount was not included in book income. Gosling's depreciation expense per books was $72,000, and its MACRS depreciation deduction was $105,000. Gosling recorded $58,000 of business meals and $27,000 of entertainment expense for book purposes. Gosling's federal income tax expense per books was $220,000. a. Compute Gosling's taxable income and regular tax liability. b. Prepare a Schedule M-1, page 5, Form 1120, reconciling Gosling's book and taxable income.arrow_forwardfleming inc is a c corporation that files its return using a fiscal year. for the return for the fiscal year ending April 30 2019. what corporate tax rates apply to flemings incomearrow_forward
- Which of the following statements is not correct? Multiple Choice Corporations must estimate and prepay their income taxes through quarterly tax deposits. At the end of the year, when the worksheet is prepared, the Income Tax Expense account is adjusted only if the corporation owes additional taxes. Income Tax Expense may be shown as an operating expense on a corporation's income statement. The Income Tax Expense account may be either debited or credited in the adjusting journal entry for income tax at year-end.arrow_forwardA concerned government employee furnished the BIR a statement detailing the improper tax practices of a corporate taxpayer. The information was instrumental to the collection of P500,000 tax. How much informer's tax reward after tax shall be released to the informant?arrow_forwardEmerald Corporation is required to change its method of accounting for Federal income tax purposes. The change will require an adjustment to income to be made over three tax periods. Jonas, the sole shareholder of Emerald Corporation, wants to better understand the implications of this adjustment for E & P purposes, because he anticipates a distribution from Emerald in the current year. Prepare a memo for your firm’s client files describing the results of your research.arrow_forward
- The following transactions were made by Company X during the current fiscal year. Explain whether or not each transaction is tax deductible under the ITAA for each transaction.arrow_forwardIn year 1 (the current year), Angel Corp. made a charitable donation of $550,000 to the Roof Over Peoples' Head Foundation (a qualifying charity). For the year, Angel reported taxable income of $4,000,000 before deducting any charitable contributions and before deducting its $90,000 dividends received deduction. Required: A. What amount of the $550,000 donation is Angel allowed to deduct for tax purposes in year 1? B. In year 2, Angel did not make any charitable contributions. It reported taxable income of $7,00,000 before any charitable contribution deductions and before a $120,000 dividends received deduction. What book-tax difference associated with the charitable contributions will Angel report in year 2? Is the difference favorable or unfavorable? Is it permanent or temporaryarrow_forwardMike Inc. is switching from a cash to an accrual method for tax purposes effective 1/1/X2. Mike filed for approval with the IRS and was granted permission to change its method. As of 12/31/X1 Mike Inc. had the following information: Receivables:Accounts receivable from sales to customers $ 300,000Interest receivable from municipal bonds 100,000 Accounts payable and accrued expenses:Accounts payable from ordinary & necessary Business expenses $ 125,000Accrued expenses pertaining to tax exemptIncome 25,000 What is the least amount of taxable income will Mike Inc recognize in 20X2 from switching from the cash to accrual method? a. $ 0b. $ 37,500c. $ 43,750d. $ 150,000e. $ 175,000arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Understanding U.S. Taxes; Author: Bechtel International Center/Stanford University;https://www.youtube.com/watch?v=QFrw0y08Oto;License: Standard Youtube License