Question

Exercise 2-32 (Algorithmic) (LO. 4)

Compute the income tax liability for each of the following unrelated C corporations.

Click here to access the tax table to use for this problem.

a. Darter Corporation has taxable income of $69,700.
$

b. Owl Corporation has taxable income of $13,948,000.
$

c. Toucan Corporation, a personal service corporation, has taxable income of $365,000.
$

Answer 1

Ans.   

INCOME RATE CHART FOR CORPORATIONS

IF TAXABLE INCOME IS OVER	BUT NOT OVER	TAX IS	OF THE AMOUNT OVER
$0	$50,000	15%	$0
$50,000	$75,000	$7,500 + 25%	$50,000
$75,000	$100,000	$13,750 + 34%	$75,000
$100,000	$335,000	$22,250 + 39%	$100,000
$335,000	$10,000,000	$113,900 + 34%	$335,000
$10,000,000	$15,000,000	$3,400,000 + 35%	$10,000,000
$15,000,000	$18,333,333	$5,150,000 + 38%	$15,000,000
$18,333,333		35%	$0

Ans. (1) Darter corporation has taxable income of $ 67,700

According to tax rate chart $50,000 To $75,000 tas rate is 25%

=50000 - 67,700 = 17,700 x 25% = 4,425

Income Tax Liability is = $7,500+$4,425 = $11,925

Ans. (2) Owl corporation has taxable income of $13,948,000

According to tax rate chart $10,000,000 To $15,000,000 Tax rate is 3,400,000+35%

=13,948,000 - 10,000,000 = 3948000 x 35% = 1381800

Income Tax Liability is = 3,400,000+1381800 = $4781800

Ans C. Toucan corporation, a personal service corporation has taxable income of $365,000

According to tax rate chart $335,000 To 10,000,000 tax rate is $113,900 + 34%

=335,000 - 365,000 = 30000 x 34% = 10,200

Income tax liability = $113,900+$10,200 = $124,100