Question

Exam Corporation reports taxable income of $800,000 on its federal income tax return. Given the following information from the corporation's records, determine its M-1 book income:

Deduction for federal income taxes per

    financial accounting records                                                       $272,000

Depreciation claimed on the tax return                                             140,000

Depreciation recorded on the financial accounting records                80,000

Dividends-received deduction                                                             48,000

Life insurance proceeds on death of corporate officer                       90,000

Answer 1

	Exam Corporation M-1 Book Income Caluculation:-
	Notes		Particulars	Amount
			Taxable Income	800000
	1	Add:-	Deduction for federal income taxes per financial accounting records	272000
	2	Add:-	Difference of depreciation (140000-80000)	60000
	3	Add:-	Dividends-received deduction	48000
	4	Add:-	Life insurance proceeds on death of corporate officer	-
			Book Income	1180000
		Notes
		1	These are general deductions when we calculate taxable income, so added back
		2	Depreciation as per income tax is more than depreciation as per book value, so difference is added back
		3	When company recieves the dividend they can get deduction under the provision of tax laws so added back
		4	Some companies take insurance of key officials and the proceeds they receive is not taxable, this is already included in taxable income, no need to add back again

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