Problem 6 Determine taxable income in each of the following

Problem 6

Determine taxable income in each of the following instances. Assume that the corporation is a C corporation and that book income is before any income tax expense.

Book income of $152,000 including municipal bond interest of $4,000, a charitable contribution of $10,000, and dividends of $6,000 from a 10% owned domestic corporation. The corporation also has a $16,000 charitable contribution carryover.

Solution

Solution :- Taxable income = 152000 - 4000 - 4200^{(Note 1)} - 5380^{(Note 2)}

= $ 138420.

Note 1 :- Dividend received deduction (DRD) = 6000 * 70 % = $ 4200.

Note 2 :- Charitable contribution adjustment = 10 % of (152000 - 4000 - 4200 + 10000) - 10000.

= 10 % of 153800 - 10000.

= 15380 - 10000.

= $ 5380.

Conclusion :- Taxable income in the given instance = $ 138420.