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Jackson Corporation prepared the following book income statementfor its year ended Decembe

Jackson Corporation prepared the following book income statementfor its year ended Decembe

Jackson Corporation prepared the following book income statementfor its year ended December 31, 2010:

Sales $900,000

Minus: Cost of goods sold (500,000)

Gross Profit: $400,000

Plus: Dividends received on Invest Corporations stock $3,000

Gain on sale of Invest Corporations stock 30,000

Total dividends and gain $33,000

Minus: Depreciation ($7,500 + $32,000) $39,500

Bad debt expense 22,000

Other operating expenses 105,500

Loss on sale of Equipment 1 70,000

Total expenses and loss (237,000)

Net income per books before taxes $196,000

Minus: Federal income tax expense (60,000)

Net income per books $136,000

Information on equipment depreciation and sale:

Equipment 1:

• Acquired March 3, 2008 for $180,000

• For books: year life; straight-line depreciation

• Sold February 17, 2009 for $80,000

Sales price $80,000

Cost $180,000

Minus: Depreciation for 2008 (1/2 year) $7,500

Depreciation for 2009 ($180,000/12) 15,000

Depreciation for 2010 (1/2 year) 7,500

Total book depreciation (30,000)

Book value at time of sale (150,000)

Book loss on sale of Equipment 1 $(70,000)

• For tax: Seven-year MACRS property for which the corporation madeno Sec. 179 election in the acquisition year end elected out ofbonus depreciation.

Equipment 2:

• Acquired February 16, 2009 for $384,000

• For books: year life; straight-line depreciation

• Book depreciation in 2010: $384,000/12 = $32,000

• For tax: Seven-year MACRS property for which the corporation madethe Sec. 179 election but elected out of bonus depreciation.

Other information:

• Under the direct writeoff method, Jackson deducts $15,000 of baddebts for tax purposes.

• Jackson has a $40,000 NOL carryover and a $6,000 capital losscarryover from last year.

• Jackson purchased the Invest Corporation stock (less than 20%owned) on June 21, 2008, for $25,000 and sold the stock on December22, 2010, for $55,000.

• Jackson Corporation has qualified production activities income of$120,000, and the applicable percentage is 9%.

Required:

1. For 2013, calculate Jackson's tax depreciation deduction forEquipment 1 and 2, and determine the tax loss on sale of Equipment1.

2. For 2013, calculate Jackson's taxable income and taxliability.

3. Prepare a schedule reconciling net income per book to taxableincome before special deductions (form 1120, line 28)

Abhinav 04-Dec-2019

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