McGraw-Hill's Taxation of Business Entities 3rd Edition by Connie Weaver, Brian Spilker, Edmund Outslay, John Robinson, Ronald Worsham, Benjamin Ayers, John Barrick

Exercise 81

Compute HC Inc.'s current year taxable income given the following information relating to its 2011 activities. Also, compute HC's Schedule M-1 assuming that HC's federal income tax expense for book purposes is $30,000.
• Gross profit from inventory sales of $310,000 (no book-tax differences).
• Dividends HC received from 28 percent-owned corporation of $120,000. (this is also HC's pro rata share of the corporation's earnings)
• Expenses other than DRD, charitable contribution (CC), net operating loss (NOL), and domestic production activities deduction (DPAD) are $300,000 (no book-tax differences).
• NOL carryover from prior year of $12,000.
• Cash charitable contribution of $50,000.
• Domestic production activities deduction of $4,000 (wage limitation does not apply).