Tax 496/596 Winter 2014 Research/Planning Problem #1 Reconciliation of Book Income to Taxable Income Ramsey Corporation, a C corporation, reports the following results for the current year: N

Tax 496/596

Winter 2014

Research/Planning Problem #1

Reconciliation of Book Income to Taxable Income

Ramsey Corporation, a C corporation, reports the following results for the current year:

Net income per books 650,000

Federal income tax 221,000

Tax-exempt interest income 5,000

MACRS/Tax depreciation 140,000

Book depreciation 100,000

Capital loss 12,000

Insurance premiums on life of corporate

officer (Ramsey is the beneficiary of the policy) 15,000

Charitable contributions 98,000

Cash dividends paid 20,000

Dividends received from an small equity investment

own less than 10% of entity 3,000

Accrued bonus to cash basis shareholder 25,000

1. Prepare a Schedule M-1 reconciling Ramsey’s book income to it’s taxable

income in 2013.

2. Name the code section which gives the rules associated with the limitations on

the following deductions:

a. Charitable contribution

b. Capital loss

c. Dividends received deduction

3. Assume zero estimates were paid in during the year, calculate the tax due.

Ignore any type of penalties that may apply.

Do not calculate the alternative minimum tax.

Please prepare your answer in an excel spreadsheet.

The score is based on a point rubric, so show all of your work.

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