Omega Corporation reports the following results for the current year:
Net income per books (before federal income taxes)……………………………$738,000
Federal income tax expense per books…………………………………………..(231,540)
Net income per books (after federal income taxes) …………………………….$506,460
Tax-exempt interest income………………………………………………………..10,000
Interest on loan to purchase tax-exempt bonds……………………………………..7,000
MACRS depreciation exceeding book depreciation………………………………40,000
Net capital loss ……………………………………………………………………..8,000
Insurance premium on life of corporate officer where Omega is the beneficiary…..9,000
Excess charitable contributions carried over to next year………………………….4,000
U.S. production activities deduction ($700.0000 × 0.09)*……………………….63,000
* Assume that qualified production activities income is $700,000.
a. Prepare a reconciliation of Omega’s taxable income before special deductions with its book income.
b. Prepare a tax provision reconciliation as in Step 9 of the Tax Provision Process.