US Taxation

() The following two responses are required for each of the items 1 through 6. Determine the amount of Schedule M-1 adjustment. Indicate if the adjustment increases, decreases, or has no effect, on taxable income. Selections I. Increases taxable income. D. Decreases taxable income. N. Has no effect on taxable income.

() For the following, indicate if the expenses are fully deductible, partially deductible, or nondeductible for regular tax purposes on federal income tax return. Selections F. Fully deductible for regular tax purposes. P. Partially deductible for regular tax purposes. N. Nondeductible for regular tax purposes.

() For the following, indicate if the items are fully taxable, partially taxable, or nontaxable for regular tax purposes. Selections F. Fully taxable for regular tax purposes. P. Partially taxable for regular tax purposes. N. Nontaxable for regular tax purposes.

Schedule M-1 Adjustment (1) (D) (N) Corp's disbursements included employee expenses for travel of $10,000, and business meals of $30,000 1 7 Corp's books expensed $7,000 for the term life insurance premiums on the corporate officers. Corp was the policy owner and beneficiary. 8 OOO 2 Corp's books indicated an $18,000 state franchise tax expense. Estimated state tax payments were $15,000. 3 3 9 Book depreciation on computers was $10,000. These computers, which cost $50,000, were placed in service in prior year. Tax depreciation used MACRS with the half-year convention. No election was made to expense part of the computer cost or to use a straight-line method, and no additional first-year depreciation was taken. 10 ooo Corp's books showed a $4,000 long-term capital gain distribution from a mutual fund corporation and a $5,000 loss on the sale of stock. The stock was an investment in an unrelated corporation. 11 un Corp's taxable income before the charitable contribution and the dividends received deductions was $600,000. Corp's books expensed $15,000 in board of director authorized charitable contributions that were paid on January 5, next year. Charitable contributions paid in current year were $35,000. 12 6 (F) (P) (N) 13 Corp's purchased theater tickets for its out of town clients. The performances took place after Corp's substantial and bona fide business negotiations with its clients. Corp's accrued advertising expenses to promote a new product line. The percent of the new product line remained in ending inventory. Corp's incurred interest expense on a loan to purchase municipal bonds. 14 0 0 0 15 0 0 0 16 O OO Corp's paid a penalty for the underpayment of prior year estimated federal income taxes. Corp's board of directors voted to pay a $500 bonus to each nonstockholder employee for current year. The bonuses were paid on February 3, next year. 17 000 (F) (P) (N) 18 The portion of Corp's refund that represented the overpayment of prior year federal income taxes. The portion of Corp's refund that is attributable to the interest on the overpayment of federal income taxes. 19 O OO Corp's received dividend income from a mutual fund that solely invests in municipal bonds. 20 0 0 0 Corp's the lessor, benefited from the capital improvements made to its property by the lessee. The lease agreement provides for a reduction in rental payments by the lessee in exchange for the improvements. 21 0 0 0 Schedule M-1 Adjustment (1) (D) (N) Corp's disbursements included employee expenses for travel of $10,000, and business meals of $30,000 1 7 Corp's books expensed $7,000 for the term life insurance premiums on the corporate officers. Corp was the policy owner and beneficiary. 8 OOO 2 Corp's books indicated an $18,000 state franchise tax expense. Estimated state tax payments were $15,000. 3 3 9 Book depreciation on computers was $10,000. These computers, which cost $50,000, were placed in service in prior year. Tax depreciation used MACRS with the half-year convention. No election was made to expense part of the computer cost or to use a straight-line method, and no additional first-year depreciation was taken. 10 ooo Corp's books showed a $4,000 long-term capital gain distribution from a mutual fund corporation and a $5,000 loss on the sale of stock. The stock was an investment in an unrelated corporation. 11 un Corp's taxable income before the charitable contribution and the dividends received deductions was $600,000. Corp's books expensed $15,000 in board of director authorized charitable contributions that were paid on January 5, next year. Charitable contributions paid in current year were $35,000. 12 6 (F) (P) (N) 13 Corp's purchased theater tickets for its out of town clients. The performances took place after Corp's substantial and bona fide business negotiations with its clients. Corp's accrued advertising expenses to promote a new product line. The percent of the new product line remained in ending inventory. Corp's incurred interest expense on a loan to purchase municipal bonds. 14 0 0 0 15 0 0 0 16 O OO Corp's paid a penalty for the underpayment of prior year estimated federal income taxes. Corp's board of directors voted to pay a $500 bonus to each nonstockholder employee for current year. The bonuses were paid on February 3, next year. 17 000 (F) (P) (N) 18 The portion of Corp's refund that represented the overpayment of prior year federal income taxes. The portion of Corp's refund that is attributable to the interest on the overpayment of federal income taxes. 19 O OO Corp's received dividend income from a mutual fund that solely invests in municipal bonds. 20 0 0 0 Corp's the lessor, benefited from the capital improvements made to its property by the lessee. The lease agreement provides for a reduction in rental payments by the lessee in exchange for the improvements. 21 0 0 0