Lopez Corporation has income per books before tax of $323,000. In computing income per books, Lopez deducted $20,000 for meals and entertainment expenses, $3,000 for premiums on officers' life insurance policies (the corporation is the beneficiary for these policies), and $100 for fines. What is Lopez Corporation's taxable income?

Question

Quizplus · Accepted Answer

The taxable income is calculated by adding back non-deductible expenses to the book income. Meals and entertainment expenses are only 50% deductible, so $10,000 is added back. Life insurance premiums where the corporation is the beneficiary are not deductible, so $3,000 is added back. Fines are also not deductible, so $100 is added back. Therefore, taxable income is $323,000 + $10,000 + $3,000 + $100 = $336,100.

Lopez Corporation Has Income Per Books Before Tax of $323,000