Question

Compute MV Corp.’s 2019 taxable income given the following information relating to its year 1 activities. Also, compute MV’s Schedule M-1 assuming that MV’s federal income tax expense for book purposes is $100,000. Use Exhibit 16-6.

• Gross profit from inventory sales of $500,000 (no book–tax differences).
• Dividends MV received from 25 percent-owned corporation of $100,000 (assume this is also MV’s pro rata share of the distributing corporation’s earnings).
• Expenses other than DRD, charitable contribution (CC), and net operating loss (NOL), are $350,000 (no book–tax differences).
• NOL carryover from 2018 of $10,000.
• Cash charitable contribution of $120,000.

• Compute MV Corp.’s 2019 taxable income given the following information relating to its year 1 activities. (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

  Description Book Income Book-tax adjustments Taxable Income (Dr) Cr (Dr) Cr (Dr) Cr Gross profit $500,000 $500,000 Other income: Dividend income 100,000 100,000 Gross Income $600,000 $600,000 Expenses: Business expenses other than DRD, CC, and NOL (350,000) (350,000) Federal income tax expense (100,000) 100,000 0 Total expenses before charitable contribution, NOL, and DRD (450,000) (350,000) Income before charitable contribution, NOL, and DRD $150,000 $250,000 NOL carryover from prior year (10,000) (10,000) Taxable income for charitable contribution limitation purposes (modified taxable income) $240,000 Charitable contributions (120,000) 96,000 (24,000) Taxable income before DRD $216,000 Dividends received deduction (DRD) ? ? Book/Taxable income $30,000 $(10,000) $196,000 $216,000

Answer 1

Compute MV Corp.’s 2019 taxable income given the following information relating to its year 1 activities.

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