Timpanogos Incorporated is an accrual-method, calendar-year corporation. For 2021, it reported financial statement income after taxes of $1,382,260. Timpanogos provided the following information relating to its 2021 activities:
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. Qualified charitable contributions Cost of goods sold for book and tax purposes Interest income on tax-exempt bonds Interest paid on loan obtained to purchase tax-exempt bonds Rental income payments received and earned in 2021 Rental income payments received in 2020 but earned in 2021 Rental income payments received in 2021 but not earned by year-end Tax depreciation Book Depreciation Net capital loss Federal income tax expense for books in 2021 $ 206,000 2,060,000 21,630 185,400 309,000 41,200 46, 350 15,450 10,300 30,900 56,650 25,750 43,260 319,300 Reconcile book income to taxable income for Timpanogos Incorporated. 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 (1). (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) Description Book Income (Dr) Cr Book-tax adjustments (Dr) Permanent (P) or Temporary (1) Book-tax Permanent (P) or Taxable adjustments Cr Temporary (T) Income (Dr) Cr S 0 s 0 S 0 S 0 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 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 0 0 S 0 S 0 $ 0 1 $ 0 S 0 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 6. Total 7. Income recorded on books this year not included on this return (itemize): Tax-exempt interest Life insurance proceeds from CEO's death 8. Deductions on this return not charged against book income this year (itemize): a. Depreciation b. Charitable contributions Section 263A costs 9. Total 10. Income 0 S Compute Timpanogos Incorporated's tax liability for 2021. Tax liability 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. Qualified charitable contributions Cost of goods sold for book and tax purposes Interest income on tax-exempt bonds Interest paid on loan obtained to purchase tax-exempt bonds Rental income payments received and earned in 2021 Rental income payments received in 2020 but earned in 2021 Rental income payments received in 2021 but not earned by year-end Tax depreciation Book Depreciation Net capital loss Federal income tax expense for books in 2021 $ 206,000 2,060,000 21,630 185,400 309,000 41,200 46, 350 15,450 10,300 30,900 56,650 25,750 43,260 319,300 Reconcile book income to taxable income for Timpanogos Incorporated. 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 (1). (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) Description Book Income (Dr) Cr Book-tax adjustments (Dr) Permanent (P) or Temporary (1) Book-tax Permanent (P) or Taxable adjustments Cr Temporary (T) Income (Dr) Cr S 0 s 0 S 0 S 0 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 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 0 0 S 0 S 0 $ 0 1 $ 0 S 0 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 6. Total 7. Income recorded on books this year not included on this return (itemize): Tax-exempt interest Life insurance proceeds from CEO's death 8. Deductions on this return not charged against book income this year (itemize): a. Depreciation b. Charitable contributions Section 263A costs 9. Total 10. Income 0 S Compute Timpanogos Incorporated's tax liability for 2021. Tax liability
