$1.$ XYZ owns $30\%$ of the outstanding Hobble Corporation $($HC$)$ stock. Hobble Corporation reported $$1,000,000$ of income for the year. XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC$\text{'}$s earnings for the year. HC also distributed a $$200,000$ dividend to XYZ$.$ For tax purposes, HC reports the actual dividend received as income, not the pro rata share of HC$\text{'}$s earnings.

$2.$ Of the $$20,800$ interest income, $$5,200$ was from a City of Seattle bond, $$7,200$ was from a Tacoma City bond, $$6,200$ was from a fully taxable corporate bond, and the remaining $$2,200$ was from a money market account.

$3.$This gain is from equipment that XYZ purchased in February and sold in December $($i$.$e$.,$ it does not qualify as $1231$ gain$).$

$4.$ This includes total officer compensation of $$2,500,000($no one officer received more than $$1,000,000$ compensation$).$

$5.$ This amount is the portion of incentive stock option compensation that was expensed during the year $($recipients are officers$).$

$6.$ XYZ actually wrote off $$27,500$ of its accounts receivable as uncollectible.

$7.$Tax depreciation was $$1,925,000.$

$8.$In the current year, XYZ did not make any actual payments on warranties it provided to customers.

$9.$XYZ made $$500,000$ of cash contributions to charities during the year

$10.$ On July $1$ of this year, XYZ acquired the assets of another business. In the process, it acquired $$303,000$ of goodwill. At the end of the year, XYZ wrote off $$30,500$ of the goodwill as impaired.

$11.$XYZ expensed all of its organizational expenditures for book purposes. XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes.

$12.$ The other expenses do not contain any items with book$$tax differences.

$13.$ This is an estimated tax provision $($federal tax expense$)$ for the year. Assume that XYZ is not subject to state income taxes.

Estimated tax information:

XYZ made four equal estimated tax payments totaling $$360,000($$$90,000$ per quarter$).$ For purposes of estimated tax liabilities, assume XYZ was in existence in $2022$ and that in $2022$ it reported a tax liability of $$500,000.$ During $2023,$ XYZ determined its taxable income at the end of each of the first three quarters as follows:

Quarter$-$end Cumulative taxable income $($loss$)$

First $ $405,000$

Second $ $1,105,000$

Third $ $1,425,000$

Finally, assume that XYZ is not a large corporation for purposes of estimated tax calculations.

Note: Do not round intermediate calculations. Round your answers to the nearest dollar amount.

A$.$ Compute XYZ$\text{'}$s taxable income.

B$.$ Compute XYZ$\text{'}$s income tax liability.