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(Solved) Taxable Income Greater Than $0 $50,000 $75,000 $100,000 2012 Corporate Tax Rate Schedule (partial) But Less Than Or Tax Is Of the amount Equal To...


I don't understand how to answer question # 2 . Assuming that JKEB Corporation's normal business expenses were $82,000 instead of $40,000 compute its dividends received deduction for the current tax year. I know I'm probably using the DRD formula but I'm confused.

Taxable Income Greater
Than
$0
$50,000
$75,000
$100,000 2012 Corporate Tax Rate Schedule (partial)
But Less Than Or
Tax Is
Of the amount
Equal To
exceeding
$50,000
15%
$0
$75,000
$7,500 + 25%
$50,000
$100,000
$13,750 + 34%
$75,000
$335,000
$22,250 + 39%
$100,000 JKEB Corporation has the following revenues and expenses for the current tax year:
Sales revenue, net of returns . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend Income (less than 20% owned investees) . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Normal business expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000
25,000
30,000
40,000 1. What is JKEB Corporation’s dividends-received deduction for the current tax year?
2. Assuming that JKEB Corporation’s normal business expenses were $82,000 instead
of $40,000, compute its dividends-received deduction for the current tax year.
JKEB Corporation incurred the following capital gains and losses in tax year 2012:
Short Term Capital Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short Term Capital Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long Term Capital Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long Term Capital Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,000
(10,000)
5,000
(28,000) JKEB’s prior corporate tax returns reflect the following net capital gain/ (loss):
2008 - $6,000 gain
2009—$8,000 gain
2010—($3,000) loss
2011—$1,000 gain
3. Calculate the net capital gain (loss) for 2012. How is this reported on the 2012 Form
1120?
4. Calculate the amount of capital loss carryback (if any) to tax years 2008 through 2011
inclusive.
5. Calculate the amount of capital loss carryforward (if any) to 2013. How will this loss be
treated in 2013 (i.e., as a short-term or long-term capital loss)? JKEB Corporation had the following items during its 2012 tax year:
Net income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000
Dividends received (from less than 20% owned investees). . . . . . . . . . .
10,000
Charitable contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,000
Net operating loss carryover from 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Long-term capital gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,000
Long-term capital losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,000
Short-term capital gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,000
Capital loss carryover from 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,000
Tax Credit………………………………………………………………… 4,500
6. Compute JKEB Corporation’s 2012 taxable income and income tax liability before tax
credits.
7. What are the nature and amount of any carryovers to 2013?
8. What is the taxable amount due after using the tax credit? Answers:
1. 25,000 X 70% = 17,500
2. 3. Net Capital Gains for 2012 is 20,000-10,000+5,000-28,000=13,000 (Loss) It will be
reported as long term capital.
4. Carryback to 2008 = 0
Carryback to 2009 = 8,000
Carryback to 2010= 0
Carryback to 2011 = 1,000
Carryback is allowed for 3 years and for maximum of gain reported in that year.
5. Carryforward to 2013 = loss minus carryback
13,000-8000-1000 = 4000
Is would be a short term.
6. Net Income from Operations
Dividends
Income before deductions 150,000
10,000
160,000 Less NOL carryover from 2011
Charitable Contributions
Dividends Received 30,000
13,000 (10%*160,000-30,000)
7,000 (70%*10,000)
50,000 Taxable income 110,000 (15%*50,000) + (25%*25,000) + (34%*25,000) + (39%*10,000) =
7,500 + 6,250 + 8,500 + 3,900 = 26,150
Tax liability before Tax Credit 26,150 7. The nature and carryover to 2013 is charitable contributions carryover from 2011
30,000 – 13,000 = 17,000
Loss carryover from 2011
9,000 – 5,000 = 4,000
8. The taxable amount due after using the tax credit would be taking the tax liability minus
the tax credits. 26,150 – 4,500 = 21,650

 


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