Question

ACCT553

Week 5 Homework

(TCOs C and F)

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Please provide a response for each section in the space provided below.

When finished, submit to the assignment.

Worth 135 points

In Week 4, we learned to apply concepts and principles to measure taxable income derived from a business activity. We have identified the C corporation as a basic legal form of conducting business. Apply what you have learned in this course through Week 5 to review the facts provided below and address the four questions that follow. Where a calculation is required, please show your work for full credit (partial credit may also be awarded).

Facts:

• Greco Glass Products ("GGP") is a C Corporation.
• GGP had gross revenue from sales in 2017 of $2,300,000.
• GGPs cost of goods sold for the 2017 sales was $952,000.
• GGP incurred a long-term capital loss in the amount of $48,000.
• GGP had a capital loss carryover from 2016 of $15,000.
• GGP made cash charitable contributions totaling $135,000.
• GGP made contributions to Ronald Stump’s presidential campaign in the amount of $50,000.

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Please Check my answers

Required:

1. What is GGP’s taxable income for 2018? Show your work. (60 points)

Gross Revenue                                                                       $2,300,000

Cost of Goods Sold                                        $952,000

Charitable Contributions                                 $134,800

Taxable Income                                                                      $1,213,200                             

(2,300,000-952,000) = 1,348,000 x 10% = $134,800 charitable contribution

GGP made contributions to Ronald Stump’s presidential campaign in the amount of $50,000, which are not tax deductible.

Capital loss cannot be deducted.

2. Does GGP’s have an NOL carryforward to 2019? If so, how much? (25 points)

Zero. GGP’s does not have any carryforward

3. Does GGP’s have a capital-loss carryforward to 2019? If so, how much? (25 points)

Capital-Loss carryforward:     (48,000 + 15,000) = $63,000

4. Does GGP’s charitable contribution carry over to 2019? If so, how much? How long can it be carried over? (25 points)

Charitable contributions carryover (135,000 – 134,800) = $200 carried over for 5years.

Answer 1

1.
GGPs taxable income = Gross Revenue - COGS - 10% * (Gross Revenue - COGS) = $2,300,000 - $952,000 - 10% * (2,300,000 - $952,000) = $1,213,200
Note capital losses has to be setoff against capital gains only. Only charitable deductions can be deducted upto a maximum of 10% of Net income of a C Corporation.
2.
There is no net operating loss carry forward.
3.
The capital loss carry forward of GGP = carry forward from 2016 + Capital loss incurred   = $15,000+$48,000 = $63,000
4.
Yes, It is calculated by substracting the amount of deductions claimed from the amount of charitable donations = 135,000 - 134,800 = $200
These can be carried forward till 5 years.