Timpanogos Inc. is an accrual-method calendar-year corporation. For 2018, it reported financial statement income after taxes of $1,152,000. Timpanogos provided the following information relating to its 2018 activities: $ 200,000 2,000,000 Life insurance proceeds as a result of CEO's death Revenue from sales (for both book and tax purposes) Premiums paid on the key-person life insurance policies. The policies have no cash surrender value. Charitable contributions Cost of goods sold for book and tax purposes Interest income on tax-exempt bonds issued in 2018 Interest paid on loan obtained to purchase tax-exempt bonds Rental income payments received and earned in 2019 Rental income payments received in 2018 but earned in 2019 Rental income payments received in 2019 but not earned by year-end Tax depreciation Book Depreciation Net capital loss Federal income tax expense for books in 2019 21,000 180,000 300,000 40,000 45,000 15,000 10,000 30,000 55,000 25,000 42,000 500,000 Required: a. Reconcile book income to taxable income for Timpanogos Inc. Be sure to start with book income and identify all of the adjustments necessary to arrive at taxable income. b. Identify each book-tax difference as either permanent (P) or temporary (T). c. Complete Schedule M-1 for Timpanogos. d. Compute Timpanogos Inc.'s tax liability for 2019. Reg A and B Reqc Req D Reconcile book income to taxable income for Timpanogos Inc. Be sure to start with book income and identify all of the adjustments necessary to arrive at taxable income. Identify each book-tax difference as either permanent (P) or temporary (T). (Negative amounts should be indicated by a minus sign.) Description Book Income Book-tax adjustments (Dr) Cr (Dr) Cr $ 2,000,000 (300,000) $ 1,700,000 Taxable Income (Dr) Cr $ 2,000,000 (300,000) $ 1,700,000 Revenue from sales Cost of goods sold Gross profit Other income: Life insurance proceeds from CEO's death Interest income on tax-exempt bonds Rental income 200,000 40,000 25,000 1,965,000 (200,000) (40,000) P (10,000) $ $ 45,000 1,745,000 $ (30,000) (55,000) Gross income Expenses: Interest paid to obtain tax-exempt bonds Net capital loss Depreciation Life insurance premiums Federal income tax expense Total expenses before charitable contribution, NOL, and DRD Income before charitable contribution, NOL, and DRD NOL carryover from prior year Taxable income for charitable contribution limitation purposes Charitable contributions Book/Taxable income 45,000 42,000 25,000 21,000 500,000 633,000 1,332,000 (55,000) 1,690,000 $ $ (180,000) $ 1,152,000 $ 1,690,000 (168,000) $ 1,522,000 $(280,000) $ 0 Req A and B ReqC ReqD Complete Schedule M-1 for Timpanogos. (Enter all values as positive numbers.) Schedule M-1: Reconciliation of Income (Loss) per Books With Income per Return 1. Net income (loss) per books 2. Federal income tax per books 3. Excess of capital losses over capital gains 4. Income subject to tax not recorded on books this year (itemize): Rental income 5. Expenses recorded on books this year not deducted on this return (itemize): a. Depreciation b. Charitable contributions c. Travel and entertainment Interest paid to obtain tax-exempt bonds Life insurance premiums Total 7. Income recorded on books this year not included on this return (itemize): Tax-exempt interest Life insurance proceeds from CEO's death Rental income 8. Deductions on this return not charged against book income this year (itemize): a. Depreciation b. Charitable contributions Sec. 263A costs 9. Total 10. Income 6. $ $ 0 0 Required: a. Reconcile book income to taxable income for Timpanogos Inc. Be sure to start with book income and identify all of the adjustments necessary to arrive at taxable income. b. Identify each book-tax difference as either permanent (P) or temporary (T). c. Complete Schedule M-1 for Timpanogos. d. Compute Timpanogos Inc.'s tax liability for 2019. Complete this question by entering your answers in the tabs below. Req A and B Reg A and B Reqc ReqC Reg D Req D Compute Timpanogos Inc.'s tax liability for 2018. Tax liability
