Estimated Tax Information

ABC made four equal estimated tax payments totaling $360,000 ($90,000 per quarter). For purposes of estimated tax liabilities, assume ABC was in existence in 2021 and that in 2021 it reported a tax liability of $500,000. During 2022, ABC determined its taxable income at the end of each of the four quarters as follows:

Quarter-End Cumulative TI (Loss)

First $400,000

Second $1,100,000

third $1,400,000

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

Answer this question and show your work through each step:

Determine the quarters for which ABC is subject to penalties for the underpayment of estimated taxes (see assumptions and estimated tax information above).

XYZ corp. Income statement Book For current year Income Revenue from sales Cost of Goods Sold Gross profit $40,000,000(27,000,000)$13,000,000 Other income: Income from investment in corporate stock Interest Income Capital gains (losses) Gain or loss from disposition of fixed assets Miscellaneous income Gross income 300,000120,0002(4,000)3,000350,000$13,369,000 Expenses: Compensation (7,500,000)4 Stock option compensation Advertising Repairs and Maintenance Rent Bad Debt expense Depreciation Warranty expenses Charttable donations Meals and entertainment Goodwill Impairment Organizational expenditures Other expenses Total expenses Income before taxes Provision for income taxes Net Income after taxes 1ABC owns 30% of the outstanding Henry Corp (HC) stock. HC reported $1 million of income for the year. ABC accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC 's earnings for the year. HC also distribute a $200,000 dividend to ABC. For tax purposes, HC reports the actual dividend received as income - not the pro rata share of HC's earnings. 2 Of the $20,000 interest income, $5,000 was from a City of Detroit bond, $7,000 was from a City of Lansing bond, $6,000 was from a fully taxable corporate bond, and the remaining $2,000 was from a money market account. 3 This gain is from equipment that ABC purchased in February and sold in December (i.e., it does NOT qualify as section 1231 gain). 4 This includes total officer compensation of $2,500,000 (no one officer received more than $1 million compensation). 5 The amount is the portion of incentive stock option compensation that was expensed during the year (recipients are officers). 6ABC actually wrote off $27,000 of its accounts receivable as uncollectible. 7 Tax depreciation was $1,900,000. 8 In the current year, ABC did not make any actual payments on warranties it provided to customers. 9ABC made $500,000 of cash contributions to charities during the year. 10 On July 1 of this year, ABC acquired the assets of another business. In the process, it acquired $300,000 of goodwill. At the end of the year, ABC wrote off $30,000 of goodwill as impaired. 11ABC expensed all its organizational expenditures for GAAP purposes. On its tax return, ABC expenses the maximum of amount organizational expenditures allowed by law 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 ABC is not subject to state XYZ corp. Income statement Book For current year Income Revenue from sales Cost of Goods Sold Gross profit $40,000,000(27,000,000)$13,000,000 Other income: Income from investment in corporate stock Interest Income Capital gains (losses) Gain or loss from disposition of fixed assets Miscellaneous income Gross income 300,000120,0002(4,000)3,000350,000$13,369,000 Expenses: Compensation (7,500,000)4 Stock option compensation Advertising Repairs and Maintenance Rent Bad Debt expense Depreciation Warranty expenses Charttable donations Meals and entertainment Goodwill Impairment Organizational expenditures Other expenses Total expenses Income before taxes Provision for income taxes Net Income after taxes 1ABC owns 30% of the outstanding Henry Corp (HC) stock. HC reported $1 million of income for the year. ABC accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC 's earnings for the year. HC also distribute a $200,000 dividend to ABC. For tax purposes, HC reports the actual dividend received as income - not the pro rata share of HC's earnings. 2 Of the $20,000 interest income, $5,000 was from a City of Detroit bond, $7,000 was from a City of Lansing bond, $6,000 was from a fully taxable corporate bond, and the remaining $2,000 was from a money market account. 3 This gain is from equipment that ABC purchased in February and sold in December (i.e., it does NOT qualify as section 1231 gain). 4 This includes total officer compensation of $2,500,000 (no one officer received more than $1 million compensation). 5 The amount is the portion of incentive stock option compensation that was expensed during the year (recipients are officers). 6ABC actually wrote off $27,000 of its accounts receivable as uncollectible. 7 Tax depreciation was $1,900,000. 8 In the current year, ABC did not make any actual payments on warranties it provided to customers. 9ABC made $500,000 of cash contributions to charities during the year. 10 On July 1 of this year, ABC acquired the assets of another business. In the process, it acquired $300,000 of goodwill. At the end of the year, ABC wrote off $30,000 of goodwill as impaired. 11ABC expensed all its organizational expenditures for GAAP purposes. On its tax return, ABC expenses the maximum of amount organizational expenditures allowed by law 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 ABC is not subject to state