Question

ACCOUNTING TAX 1. Donor Corporation had the following income and deductions for last year: Sales $5,000...

ACCOUNTING TAX

1. Donor Corporation had the following income and deductions for last year:

Sales $5,000
Cost of sales 3,500,000
Other operating expenses 800,000
Dividends(from 5% owned domestic corporations) 100,000

Donor Corporation also made contributions (not included above) to qualifying charitable organizations of $175,000. Determine Donor Coporation's taxable income for the year.

2. Barbara sells an asset to her wholly-owned corporation. The asset has a basis of $32,000 and a fair market value at the time of the sale of $27,000. What is the corporation's recognized gain or loss if it sells the asset for $30,000 several years later?

Homework Answers

Answer #1

1) taxable income = $650000

Sales 5000000
Dividend 100000
Gross income 5100000
- COGS 3500000
Gross profit 1600000
Operating expenses 800000
AGI 800000
Charitable deduction 80000
DRD 70000
TAXABLE INCOME 650000

2)Corporations adjusted basis = $27,000

Since they are related taxpayers the loss of $5,000 is not recognized or realized when Barbara sells the asset to the company.

When the corporation sells the asset they can reduce the gain that they would have hadto recognize by the loss that was disallowed earlier so they would have $0.00 recognized gain

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