Comprehensive Problem C:3-63 Jackson Corporation prepared the following book income statement for its year ended December 31, 2020: Sales $950,000 Minus: Cost of goods sold (450,000) Gross profit $500,000 Plus: Dividends received on Invest Corporation stock $3,000 Gain on sale of Invest Corporation stock 30,000 Total dividends and gain 33,000 $ 24,200 22,000 105,500 70,000 Minus: Depreciation ($7,500 $16,700) Bad debt expense Other operating expenses Loss on sale of Equipment 1 Total expenses and loss Net income per books before taxes Minus: Federal income tax expense Net income per books (221,700) $311,300 (65,100) $246,200 Information on equipment depreciation and sale: Equipment 1: . For tax: Seven-year MACRS property for which the corporation made no Sec. 179 election in the acquisition year and elected out of bonus depreciation. Equipment 2: Acquired February 16, 2020 for $334,000 For books: 10-year life; straight-line depreciation (V2 year taken in first year) Book depreciation in 2020: $334,000/10 x 0.5 = $16,700 For tax: Seven-year MACRS property for which the corporation claimed 100% bonus depreciation for the entire cost. Other information: . Under the direct writeoff method, Jackson deducts $15,000 of bad debts for tax purposes. - Jackson has a $40,000 NOL carryover and a $6,000 capital loss carryover, both incurred last year. Jackson purchased the Invest Corporation stock (less than 20% owned) on June 21, 2018, for $25,000 and sold the stock on December 21, 2020, for $55,000. Required: a. For 2020, calculate Jackson's tax depreciation deduction for Equipment 1 and Equipment 2, and determine the tax loss on the sale of Equipment 1. b. For 2020, calculate Jackson's taxable income and tax liability. c. Prepare a schedule reconciling net income per books to taxable income before special deductions (Form 1120, line 28). . For tax: Seven-year MACRS property for which the corporation made no Sec. 179 election in the acquisition year and elected out of bonus depreciation. Equipment 2: Acquired February 16, 2020 for $334,000 For books: 10-year life; straight-line depreciation (V2 year taken in first year) Book depreciation in 2020: $334,000/10 x 0.5 = $16,700 . For tax: Seven-year MACRS property for which the corporation claimed 100% bonus depreciation for the entire cost. Other information: Under the direct writeoff method, Jackson deducts $15,000 of bad debts for tax purposes. Jackson has a $40,000 NOL carryover and a $6,000 capital loss carryover, both incurred last year. Jackson purchased the Invest Corporation stock (less than 20% owned) on June 21, 2018, for $25,000 and sold the stock on December 21, 2020, for $55,000. Required: a. For 2020, calculate Jackson's tax depreciation deduction for Equipment 1 and Equipment 2, and determine the tax loss on the sale of Equipment 1. b. For 2020, calculate Jackson's taxable income and tax liability c. Prepare a schedule reconciling net income per books to taxable income before special deductions (Form 1120, line 28). Comprehensive Problem C:3-63 Jackson Corporation prepared the following book income statement for its year ended December 31, 2020: Sales $950,000 Minus: Cost of goods sold (450,000) Gross profit $500,000 Plus: Dividends received on Invest Corporation stock $3,000 Gain on sale of Invest Corporation stock 30,000 Total dividends and gain 33,000 $ 24,200 22,000 105,500 70,000 Minus: Depreciation ($7,500 $16,700) Bad debt expense Other operating expenses Loss on sale of Equipment 1 Total expenses and loss Net income per books before taxes Minus: Federal income tax expense Net income per books (221,700) $311,300 (65,100) $246,200 Information on equipment depreciation and sale: Equipment 1: . For tax: Seven-year MACRS property for which the corporation made no Sec. 179 election in the acquisition year and elected out of bonus depreciation. Equipment 2: Acquired February 16, 2020 for $334,000 For books: 10-year life; straight-line depreciation (V2 year taken in first year) Book depreciation in 2020: $334,000/10 x 0.5 = $16,700 For tax: Seven-year MACRS property for which the corporation claimed 100% bonus depreciation for the entire cost. Other information: . Under the direct writeoff method, Jackson deducts $15,000 of bad debts for tax purposes. - Jackson has a $40,000 NOL carryover and a $6,000 capital loss carryover, both incurred last year. Jackson purchased the Invest Corporation stock (less than 20% owned) on June 21, 2018, for $25,000 and sold the stock on December 21, 2020, for $55,000. Required: a. For 2020, calculate Jackson's tax depreciation deduction for Equipment 1 and Equipment 2, and determine the tax loss on the sale of Equipment 1. b. For 2020, calculate Jackson's taxable income and tax liability. c. Prepare a schedule reconciling net income per books to taxable income before special deductions (Form 1120, line 28). . For tax: Seven-year MACRS property for which the corporation made no Sec. 179 election in the acquisition year and elected out of bonus depreciation. Equipment 2: Acquired February 16, 2020 for $334,000 For books: 10-year life; straight-line depreciation (V2 year taken in first year) Book depreciation in 2020: $334,000/10 x 0.5 = $16,700 . For tax: Seven-year MACRS property for which the corporation claimed 100% bonus depreciation for the entire cost. Other information: Under the direct writeoff method, Jackson deducts $15,000 of bad debts for tax purposes. Jackson has a $40,000 NOL carryover and a $6,000 capital loss carryover, both incurred last year. Jackson purchased the Invest Corporation stock (less than 20% owned) on June 21, 2018, for $25,000 and sold the stock on December 21, 2020, for $55,000. Required: a. For 2020, calculate Jackson's tax depreciation deduction for Equipment 1 and Equipment 2, and determine the tax loss on the sale of Equipment 1. b. For 2020, calculate Jackson's taxable income and tax liability c. Prepare a schedule reconciling net income per books to taxable income before special deductions (Form 1120, line 28)
