Question

A Corporation reported the following activity in 2010:

• Income from operations:                                           $2,000,000
• Deductions from operations before

Special items:                                                                (1,300,000)

• Dividends from 15% owned corporations           100,000
• Total business meals                                                        (40,000)
• Total charitable contribution                                       (130,000)
• NOL carryover from previous year                           (35,000)

Assignment - Calculate the following in good form:

1. Corporate taxable income
2. Corporate tax liability
3. Charitable contribution carryover (if any)

Answer 1

	Particulars	$
	Income from operations	$        2,000,000
Less	ordinary deductions	$      (1,300,000)
Less	Charitable deductions 10% of eligible base $665,000 x 10%	$            (66,500)
	Income before NOL & special deductions	$           633,500
Less	NOL As prior to 2018 100% deductible	$            (35,000)
	Income before special deductions	$           598,500
Less	Dividend received deduction	$            (50,000)
	Taxable income	$           548,500
	Tax rate	21%
	Tax liability	$           115,185
	Charitable contribution carryover	$             63,500

Working note;

	Calculation of base for charitable deductions	$
	Total income	$        2,000,000
Less	Ordinary deductions	$      (1,300,000)
Less	NOL carryover to current year	$            (35,000)
	Base to calculate 10% limit for charity deduction	$           665,000

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