Timpanogos Inc. is an accrual-method calendar-year corporation. For 2020, it reported financial statement income after taxes of $1,342,000. Timpanogos provided the following information relating to its 2020 activities:

Life insurance proceeds as a result of CEO’s death ....................................... $200,000

Revenue from sales (for book and tax purposes) .......................................... 2,000,000

Premiums paid on the key-person life insurance policies. The

policies have no cash surrender value. ................................................................21,000

Charitable contributions ......................................................................................180,000

Cost of goods sold for book purposes and tax .................................................300,000

Interest income on tax-exempt municipal bonds ............................................. 40,000

Interest paid on loan obtained to purchase tax-exempt municipal bonds .... 45,000

Rental income payments received and earned in 2020 .................................... 15,000

Rental income payments received in 2019 but earned in 2020 ....................... 10,000

Rental income payments received in 2020 but not earned by year end ......... 30,000

Tax depreciation .................................................................................................... 55,000

Book Depreciation ................................................................................................. 25,000

Net capital loss ....................................................................................................... 42,000

Federal income tax expense for books in 2020 ............................................... 310,000

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 or temporary.

c. Complete Schedule M-1 for Timpanogos.

d. Compute Timpanogos Inc.’s tax liability for 2020.