Robots, Inc. reports the following financial data for last year: Gross income fr
ID: 2422125 • Letter: R
Question
Robots, Inc. reports the following financial data for last year:
Gross income from sales and services
$200,000
Wages, cost recovery and other expenses
180,000
Dividend income from at least 20 percent owned U.S. corporations
40,000
Net operating loss carryover
20,000
Capital losses
10,000
Charitable contribution carryover
7,000
Current charitable contributions
11,000
(a.) What is Robots's charitable contribution deduction?
(b.) How much of the charitable contribution carryover is used up?
(c.) What is taxable income?
(d.) What is the dividends received deduction
Gross income from sales and services
$200,000
Wages, cost recovery and other expenses
180,000
Dividend income from at least 20 percent owned U.S. corporations
40,000
Net operating loss carryover
20,000
Capital losses
10,000
Charitable contribution carryover
7,000
Current charitable contributions
11,000
Explanation / Answer
Answer:(a) Contribution base: $200,000 - $180,000 + $40,000 - $20,000 = $40,000 Thus, only $4,000 is deductible. The remaining $7,000 of current distributions is carried forward, as is last year's carryover.
Answer:(b) None of it, since current contributions exhausted the 10 percent limitation.
Answer:(c) Robots's taxable income is as follows:
Net income from operations $20,000
Dividends $40,000
Less 80 percent 32,000 8,000
$28,000
NOL carryback (20,000)
Charitable contributions (4,000)
$ 4,000
Answer:(d) $32,000, the full deduction, since the taxable income limitation equals $60,000 ($20,000 + $40,000)
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