ACC 317 Problems
1. Janice is the Sole owner of Catbird Company. In the current year. Catbird had operating income of $100,000, a long term capital gain of $15,000, and a charitable contribution of $5,000. Janice withdrew $70,000 of profit from Catbird. How should Janice report this information on her individual tx return
a. An LLC
b. An S Corporation
c. A C corporation
2. Lupe, a cash basis taxpayer, owns 55% of the stock of Jasper Corporation, a calendar year accrual basis C Corporation. On december 31, 2013, Jasper accrues a performance bonus of $100,000 to Lupe that it pays to him on January 15, 2014. In whic year can Jasper deduct the bonus? In which year must Lupe include the bonus in gross income?
3. Schdule M-1 of Form 1120 is used to reconcile financial net income with taxable income reported on the corporations income tax return as follows: net income per books+ additions- subtractions = taxable income. Classify the following items as additions or subtractions in the Schedule M-1 reconciliations.
a. Life insurance proceeds received upon death of covered executive.
b. Tax depreciation in excess of book depreciation.
c. Federal income tax per books.
4. In the current year, Tanager Corporation (a C corporation) had operating income of $480,000 and operating expenses of $390,000. In addition, Tanager had a long-term capital gain of $55,000 and a short-term capital loss of $40,000
a. Compute Tanager’s taxable income and tax for the year.
b. Assume, instead that Tanagers long-term capital gain was 15,000 (not $55,000) Compute Tanagers taxable income and tax for the year.
5. Egret Corporation, a calender year C Corporation, was formed on March 7, 2013, and opened for business on July 1, 2013. After its formation but prior to opening for business, Egret incurred the followng expenditures:
Accounting $7,000
Advertising 14,500
Employee payroll 11,000
Rent 8,000
Utilities 1,000
What is the maximum amount of these expenditures that Egret can deduct in 2013?
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