Pace Corporation reports the following results for the current year: Gross profi
ID: 2385704 • Letter: P
Question
Pace Corporation reports the following results for the current year:Gross profit on sales ________________ $120,000
Long-term capital loss ______________ 10,000
Short-term capital loss _____________ 5,000
Dividends from 40%-owned _________ 30,000
domestic corporation
Operating expenses ________________ 65,000
Charitable contributions ____________ 10,000
**please show work**
a. What are Pace's taxable income and income tax liability, assuming qualified production activities income is $55,000.
b. What carrybacks and carryovers (if any) are available and to what years must they be carried?
Explanation / Answer
Pace Corporation's taxable income:
Gross profits $120,000
Dividends (more than 20%-owned corporations) 30,000
Gross income $150,000
Minus: Operating expenses ( 65,000)
Adjusted taxable income $ 85,000
Minus: Charitable contribution deduction (0.10 x $85,000) ( 8,500)
Minus: Dividends-received deduction (0.80 x $30,000) ( 24,000)
Taxable income before the U.S. production activities income $ 52,500
Minus: U.S. production activities deduction ($52,500 x 0.03) ( 1,575)
Taxable income $ 50,925
Pace Corporation's regular tax liability [$7,500 + (0.25 x $925)] $ 7,731
b)
Pace Corporation has a $1,500 ($10,000 - $8,500) charitable contribution carryover to the next five years. Pace also has a $15,000 ($10,000 + $5,000) capital loss that it can carry back three years and forward five years as a short-term capital loss
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.