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

CITE CODE SECTION AND SHOW WORK

(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

Answer 1

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 carry back (20,000)

Charitable contributions. (4,000)

Taxable income. $ 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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