1. Capital Corp has the following capital gains and losses in its first 6 years of existence. Assume in each of the years it had taxable income of $20,000,000.

Year 1Long termcapital gains $10,000

Year 2Short termcapital gains $20,000

Year 3Short termcapital loss ($25,000)

Year 4Long termcapital gains $30,000

Year 5Long termcapital loss ($55,000)

Year 6Short termcapital gains $80,000

a) What rate of tax would Capital pay on its gains when it filed its initial tax return for year 1?

b) How much if any of theshort termcapitalgainwill be reported on the year 6 tax return?

c) Assume in year 7 Capital has along termcapital loss of $160,000. How much carryover will it have and how long will capital have to be able to use this loss?

2. In year 1, a corporation has taxable income of $1 million before deducting an otherwise allowable charitable contribution of $150,000. There are no carrybacks to the current year, no DPAD, and no dividends received deduction but there is a $10,000 NOL carryover that was deducted in arriving at the $1 million taxable income. All of the corporations income is from the sale of inventory.

a) How much if any charitable contribution is the corporation entitled to?

b) What if anything happens to any part of the contribution that cant be deducted in year 1?

c) In year 2 the corporation has an NOL of $30,000 that it carries back to year 1. What happens to the charitable contribution in year 1?

d) In year 3 the corporation has taxable income of $100,000, there is no DPAD, and no dividends receiveddeductionand it makes otherwise deductible charitable contributions of $8,000. How much charitable contribution can the corporation deduct, and what years does it come from?

e) Can an accrual basis corporation deduct an otherwise deductible charitable contribution that is not paid until the following year? If yes, what if any requirements are necessary?

3. A corporation has gross income from services of $700,000 and deductible compensation expense of $100,000. In addition, the corporation receives dividend income from U.S. corporations in which it owns less than 1% of the stock, in the amount of $200,000. Assume the corporation does not qualify for the U.S. Domestic Production Activities Deduction.

a) Show the computation of the corporations taxable income for the year.

b) Suppose the gross income from services was $70,000 but all other figures are the same. Compute the taxable income.

c) Suppose the gross income from services was $30,000. Compute the taxable income.

4. A corporation hasgrossincome of $800,000 and deductible expenses of $850,000 in the current year. All of the income is from sales of inventory. In the three years prior to the currentyearthe corporation had taxable income of $300,000 (three years ago) $20,000 (two years ago) and $110,000 last year. What are the tax consequences to the corporation in the current year, what alternatives does it have, and what would you recommend as the tax advisor? State any additional information or assumptions necessary to make your recommendation.