To prepare for Project Part 2:
Revisit the assigned readings for Modules 4 and 5 from
In addition, revisit the lessons for Module 4 and 5 that
present important points that you need to consider before
submitting Project Part 2.
Title: Tax Planning for Corporate Taxpayers
Jackson Corporation prepared the following book income
statement for its year ended December 31, 2013:
Minus: Cost of goods sold———–
Gross profit $500,000
Dividends received on Invest
Gain on sale of Invest Corporation
Total dividends and gain $33,000
Depreciation ($7,500 $52,000)—
Bad debt expense———————-
Other operating expenses———–
Loss on sale of Equipment 1——–
Total expenses and loss————– (257,000)
Net income per book before
Federal income tax expense——–
Net income per book$186,000
Information on equipment depreciation and sale:
Acquired March 3, 2011 for $180,000
For books: 12-year life; straight-line depreciation
Sold February 17, 2013 for $80,000
Sales price $80,000
Depreciation for 2011 (1⁄2 year)
Depreciation for 2012
Depreciation for 2013 (1⁄2 year)
Total book depreciation (30,000)
Book value at time of sale (150,000)
Book loss on sale of Equipment 1 $70,000
For tax: Seven-year Modified Accelerated Cost Recovery
System (MACRS) property for which the corporation made
no Sec. 179 election in the acquisition year and elected out
of bonus depreciation.
• Acquired February 16, 2012 for $624,000
• For books: 12-year life; straight-line depreciation
• Book depreciation in 2013: $624,000/12 = $52,000
• For tax: Seven-year MACRS property for which the
corporation made the Sec. 179 election in 20ation made the Sec. 179 election in 2012 but elected
out of bonus depreciation.
Under the direct write-off method, Jackson deducts $15,000
of bad debts for tax purposes.
Jackson has a $40,000 Net Operating Loss (NOL) carryover
and a $6,000 capital loss carryover from last year.
Jackson purchased the Invest Corporation stock (less than
20% owned) on June 21, 2011, for $25,000 and sold the
stock on December 23, 2013, for $55,000.
Jackson Corporation has a qualified production activities
income of $120,000.
1. For 2013, calculate Jackson’s tax depreciation deduction for
Equipment 1 and Equipment 2, and determine the tax loss
on the sale of Equipment 1.
2. For 2013, calculate Jackson’s taxable income and tax
Prepare a schedule reconciling net income per book to
taxable income before special deductions (Form 1120, line
Submit your answer in a Microsoft Word document, showing stepby-step
solutions for all calculations. The submission should use:
Font: Arial; 12-point
Line spacing: Double
Citation: APA format
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