COMPREHENSIVE PROBLEM 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: Acquired March 3, 2018 for $180,000 For books: 12-year life; straight-line depreciation Sold February 17, 2020 for $80,000 Sales price $ 80,000 Cost $180,000 Minus: Depreciation for 2018 (12 year) $ 7,500 Depreciation for 2019 ($180,000/12) 15,000 Depreciation for 2020 (12 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 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 (12 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 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: Acquired March 3, 2018 for $180,000 For books: 12-year life; straight-line depreciation Sold February 17, 2020 for $80,000 Sales price $ 80,000 Cost $180,000 Minus: Depreciation for 2018 (12 year) $ 7,500 Depreciation for 2019 ($180,000/12) 15,000 Depreciation for 2020 (12 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 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 (12 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)