Question

84) Eagle Corporation, a personal holding company, has the following results:

Taxable income              $200,000

Dividends-received deduction              30,000

Excess charitable contributions              10,000

Long-term capital gains              10,000

Federal income taxes              61,000

Calculate the PHC tax.

85) Raptor Corporation is a PHC for 2009 and reports $200,000 of taxable income on its federal income tax return.

Operating profit              $100,000

Long-term capital gain              80,000

Dividends (20%-owned corporation)              90,000

Interest              100,000

Gross income              370,000

Salaries expense              (50,000)

General and administrative expense              (25,000)

Dividends-received deduction              (72,000)

Taxable income              $223,000

Regular tax liability              $ 70,220

What is Raptor's PHC tax, assuming that it does not pay any dividends?

86) Mullins Corporation is classified as a PHC for the current year, reporting $263,000 of taxable income on its federal income tax return:

Operating profit              $150,000

Long-term capital gain              20,000

Short-term capital gain              20,000

Dividends (from 25%-owned domestic corporation)200,000

Interest              150,000

Gross income              $540,000

Minus: general and administrative expenses( 40,000)

Minus: salaries              ( 30,000)

"Adjusted" taxable income              $470,000

Minus: charitable contributions              ( 47,000)

Taxable income before special deductions$423,000

Minus: dividends-received deduction              (160,000)

Taxable income              $263,000

Actual charitable contributions made by Mullins Corporation were $75,000. What are the federal income tax due and the personal holding company (PHC) tax liability? Discuss the methods (if any) by which payment of the PHC tax can be avoided.

Answer 1

84) Eagle's Corporation, a PHC, tax is

Taxable income - 200000

Add : Dividend received deduction- 30000

Less : Long term capital gains: (10000)

Less : Federal income taxes: (61000)

PHC is 20% of 159000 = 31800.

Excess charitable contribution is

85) Rapor corporation is a PHC, tax is

Taxable income = 2231000

Add: Dividends- received deduction: 72000

Less: long term capital gains = 80000

Less: tax liability : 70220

PHC is 20% of 144780 = 28956.

86) Mullins corporation for current year,

Federal tax liability:

PHC tax liability

Taxable income = 263000

Add: Dividends- received deduction: 160000

Less: Net capital gains = 40000

Less: tax liability :

Tax of PHC is 20% * 383000= 76600

Excess charitable contribution is 75000-47000 = 28000.