XYZ Inc. had the following US GAAP income items:
In 2014, XYZ Inc. paid off the mortgage.
|
2012 |
2013 |
2014 |
Notes: |
| Book P&L |
|
|
|
|
| Description |
Dr (Cr) |
Dr (Cr) |
Dr (Cr) |
|
| Revenue |
$(300,000) |
$(400,000) |
$(500,000) |
no book to tax differences |
| Dividend income from Lowell Inc. |
$(50,000) |
$(50,000) |
$(50,000) |
qualifies for DRD |
| Gross Income |
$(350,000) |
$(450,000) |
$(550,000) |
|
| Expenses: |
|
|
|
|
| Business expenses |
$200,000 |
$200,000 |
$200,000 |
no book to tax differences |
| Depreciation |
$10,000 |
$10,000 |
$10,000 |
Calculate tax depreciation from Chapter 9, Date placed in service = 1/1/2012. Assume no tax to E&P differences. |
| Charitable contributions |
$20,000 |
$25,000 |
$30,000 |
|
| Wages Shareholder A |
$50,000 |
$60,000 |
$70,000 |
no book to tax differences (associated taxes booked in business expenses) |
| Wages Shareholder B |
$50,000 |
$60,000 |
$70,000 |
no book to tax differences (associated taxes booked in business expenses) |
| Income before tax |
$(20,000) |
$(95,000) |
$(170,000) |
|
| Federal income tax expense (estimate booked) |
$30,000 |
$35,000 |
$40,000 |
|
| Net (Income)Loss |
$10,000 |
$(60,000) |
$(130,000) |
|
|
|
|
|
|
| Distributions to: |
|
|
|
|
| Shareholder A |
$- |
$5,000 |
$10,000 |
|
| Shareholder B |
$- |
$5,000 |
$10,000 |
|
A. Calculate taxable income for each year. (Be aware of items that carryover)
B. Calculate current E&P and accumulated E&P for each year.
C. Calculate the amount of dividend income, return of capital, or capital gain for the shareholder distributions.