Question

1. 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

• What is Robots's charitable contribution deduction?
• How much of the charitable contribution carryover is used up?
• What is taxable income?
• What is the dividends-received deduction?

Answer 1

1) 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

2) $32,000, the full deduction, since the taxable income limitation equals $60,000 ($20,000 + $40,000)