Question

1. Alsop Corporation, a calendar year C Corp, had the following income and expenses in 2019:

Income from Operations $385,000

Expenses from Operations   185,000

Dividends Received (30% ownership)     70,000

Capital Loss Carry back     22,000

Charitable Contribution   115,000

a. What is Alsop Corporation’s charitable deduction for 2019?

b. What happens to the portion (if any) that is not deducible?

2. ABC is a sole proprietorship owned by Clark. The company’s records show the following:

Sales Revenue   275,000

Interest on State of Kansas bonds       5,000

Operating Expenses   145,000

Depreciation – book purposes     17,000

Depreciation – tax purposes              22,000

Loss on sale of truck to Clark’s granddaughter           4,000

Fines to the U.S. govt. for violation of emission standards     15,000

1. Compute ABC’s net income per books before tax.
2. Compute ABC’s taxable income.

Answer 1

a) Details Income from operations Less: Expenses from operations Operating income Add Non-operating income Taxable income before capital loss carrybacks Add Capital loss carrybacks Taxable income Amount 3,85,000 -1,85,000 2,00,000 70,000 2,70,000 22,000 2,92,000 Allowable charitable deductions ($292000*0.10) 29200 The portion of un allowed charitable deduction of $85,800 b) (i.e., $115,000-$29200) is carry forward to next year. Therefore, deduction can be allowed for future periods.

Net Income as per books Sales Revenue 275000 Interest 5000 Operating Expense -145000 Dep-books -17000 loss on sale -4000 Fines -15000 Net Income 99000 99000 Taxable income Net income as per books Dep-books Dep-tax loss on sale Fine Taxable Income 17000 -22000 4000 15000 113000