Finance
Home Work Solutions: Chapter 1
Corporate rate structure: 15% 25% 34% $0 - $50,000 $50,001 - $75,000 $75,001 - 100,000
There is an added tax of 5% for income between $100,000 and $335,000. There is also an additional added tax of 3% on income between $15 million and $18 1/3 million ($18,333,333.33).
1-1.
William B. Waugh Corporation—Corporate Income Tax Sales Cost of Goods Sold + Operating Expenses Operating Profits Dividend Income Less 70% Exclusion Interest Expense S-T Capital Gain Selling Price Cost L-T Capital Gain Selling Price (#Shares)(Price/Share) 1000 x $100.00 Cost (#Shares)(Price/Share) 1000 x $80.00 Taxable Ordinary Income $50,000 25,000 451,800 $526,800 Surtax: $235,000 x .05 Total taxes due = = 11,750 $179,112 x x x .15 .25 .34 = = = $7,500 6,250 153,612 $3,000,000 (2,100,000) $900,000 $6,000 (4,200) 1,800 (400,000)
$50,000 (45,000)
5,000
$100,000
(80,000)
20,000 $526,800
1
1-2.
L. B. Menielle, Inc.—Corporate Income Tax Sales Cost of Goods Sold Gross Profits Operating Expenses Operating Profits Interest Income Dividend Income Less 70% Exclusion Interest Expense Taxable Ordinary Income Capital Gains and Losses Long-Term Gain (Loss) Short-Term Gain (Loss) Net Short-Term Gain (Loss) Tax Liability: $50,000 25,000 25,000 235,000 1,592,500 $1,927,500 x x x x x 0.15 0.25 0.34 0.39 0.34 = = = = = $7,500 6,250 8,500 91,650 541,450 $655,350 $5,000,000 (2,000,000) $3,000,000 (1,000,000) $2,000,000 20,000 $25,000 (17,500) 7,500 (100,000) $1,927,500
$40,000 (50,000) ($10,000)
The $10,000 net short-term capital loss may not be deducted from ordinary income. However, if net capital gains were realized in the previous three years, the loss may be carried back to offset those prior gains, which would reduce the corporation’s tax liability in the present year. If gains did not exist in prior years, the loss could be carried forward for five years.
2
1-4.
A. Don Drennan, Inc.—Corporate Income Tax Sales Cost of Goods
Corporate rate structure: 15% 25% 34% $0 - $50,000 $50,001 - $75,000 $75,001 - 100,000
There is an added tax of 5% for income between $100,000 and $335,000. There is also an additional added tax of 3% on income between $15 million and $18 1/3 million ($18,333,333.33).
1-1.
William B. Waugh Corporation—Corporate Income Tax Sales Cost of Goods Sold + Operating Expenses Operating Profits Dividend Income Less 70% Exclusion Interest Expense S-T Capital Gain Selling Price Cost L-T Capital Gain Selling Price (#Shares)(Price/Share) 1000 x $100.00 Cost (#Shares)(Price/Share) 1000 x $80.00 Taxable Ordinary Income $50,000 25,000 451,800 $526,800 Surtax: $235,000 x .05 Total taxes due = = 11,750 $179,112 x x x .15 .25 .34 = = = $7,500 6,250 153,612 $3,000,000 (2,100,000) $900,000 $6,000 (4,200) 1,800 (400,000)
$50,000 (45,000)
5,000
$100,000
(80,000)
20,000 $526,800
1
1-2.
L. B. Menielle, Inc.—Corporate Income Tax Sales Cost of Goods Sold Gross Profits Operating Expenses Operating Profits Interest Income Dividend Income Less 70% Exclusion Interest Expense Taxable Ordinary Income Capital Gains and Losses Long-Term Gain (Loss) Short-Term Gain (Loss) Net Short-Term Gain (Loss) Tax Liability: $50,000 25,000 25,000 235,000 1,592,500 $1,927,500 x x x x x 0.15 0.25 0.34 0.39 0.34 = = = = = $7,500 6,250 8,500 91,650 541,450 $655,350 $5,000,000 (2,000,000) $3,000,000 (1,000,000) $2,000,000 20,000 $25,000 (17,500) 7,500 (100,000) $1,927,500
$40,000 (50,000) ($10,000)
The $10,000 net short-term capital loss may not be deducted from ordinary income. However, if net capital gains were realized in the previous three years, the loss may be carried back to offset those prior gains, which would reduce the corporation’s tax liability in the present year. If gains did not exist in prior years, the loss could be carried forward for five years.
2
1-4.
A. Don Drennan, Inc.—Corporate Income Tax Sales Cost of Goods