Question

NEWS M Gmail Mingle Corporation is a calendar year, accrual method taxpayer, organized in 2010, that sells party products. Denise Rivers and her sister Shannon Jones own 100% of Mingle Corporation. All items were reported correctly for the current year financial statements. The attached spreadsheet shows the computation of financial statement net income for the current year. Mingle Corporation paid four timely estimates for federal income tax totaling $1,970,000. This was based on prior year federal income tax of $1,970,000. Dividend income was received from firms in which Mingle Corporation is not a large stockholder (less than 20% ownership interest). Current year depreciation expenses on depreciable property (all equipment) 200%DB Book Depreciation Depreciation (MACRS) Asset Equipment 55,000 60,000 Machinery 30,000 35.000 Building 15.000 15,000 TOTAL 100,000 110,000 Start-Up expenditures are being amortized over 40 years for book purposes but over 180 months for tax purposes. The costs originally capitalized in 2009 total $120,000 Mingle sold its only investment in common stock in December of the current year. Selling price was $800,000. Mingle invested $845,000 in the stock in January 2010. Mingle had no other property transactions.

Answer 1

All the countries , the preparations of accounts and presentations of financial statements are to be made under the Statute / accouting standards under the corporate laws and related rules.

However , the Income tax shall be paid according to the relavent Income tax act in exist.

Hence the Profit or Loss as per the financial statement may be differe from the taxable income.

Some of the incomes that can be non taxible under the income tax laws whereas it has to be shown in the financial statement as income. and visa virsa

SOme of the expediture allowed in the financial statements as deuductions may not be allowed under the income tax law.

HOWEVER THE FINANCIAL STATEMENT PREPARED UNDER THE CORPORATE LAWS SHALL BE ACCEPTED FOR INCOME TAX PURPOSES. HENCE THE RECONCILIATION OF TAXABLE PROFIT UNDER THE INCOME TAX LAW AND PROFIT AS PER FINANCIAL STATEMENT IS IMPORTANT.

Particulars Net Income After Federal Income Tax Add: Federal Income tax Add: Capital Transactions (loss) Life Insurance Premiums Amount Remarks and reason Computation 53,06,500.00 Income tax paid is an allowable expenditure under the corporate laws. 18,30,000.00 However not allowed under the income tax Directly Given in Question Capital Expenditure / Loss shall be adjusted seperatly under the Income 45,000.00 from Capital Gain Directly given in Income tax statement No Adjustment required - Life isurance premium paid on life of employees are an allowed expenditure under the tax law as well as the coprporate laws Directly given in Income tax statement Depreciation under the Income tax act and corporate law/accouting standard may be differ. For Income tax computations, depreciation shall be taken as per the income tax rules. Any difference shall be 10,000.00 adjusted 110000-100000 =10000 Method to be used for amortisations of deffered payment expenditures under the Income tax act and corporate law/accouting standard may be differ. For Income tax computations, Amortisation of expenses shall be taken as per the income tax rules. Any difference 5,000.00 shall be adjusted (120000/180*12)-3000 = 5000 Less Depreciation Difference Less Amortisation Difference Mingle Corporation is normally dealing with the sales of Party Products Interest received on investments shall be treated as indirect income and Income from such investments shall be taxabel under the head 44,75,000.00 other source income and not under income from business head. 4425000+50000=4475000 26,91,500.00 Less Nontaxable income Sub Total Add: Charitable Deductions Subtotal Charities and other donations shall be allowed under chapter VI of the income tax law, subjected to the other legal compliances. Normally it 2,37,000.00 is not an allowable expenditure under the head business or profession Directly given in Income tax statement 29,28,500.00 Devidend is an income that already been taxed by the distributing 90,000.00 company. Hence it is an exmpt income for the receivers Directly given in Income tax statement 28,38,500.00 Less: Dividend Received Deductions Tax Income

Hope it is clear to you.,

Thanking you.,