Robinson Corporation has income per books before tax of $2,000,000.In computing income per books, Robinson included $8,000 interest income from tax-exempt municipal bonds and $500,000 life insurance proceeds it received as the beneficiary on a policy for the corporate vice president who was killed in a plane crash while on company business, and it deducted $50,000 for business meal expenses, $4,000 for premiums on officers' life insurance policies (the corporation is the beneficiary for these policies), $40,000 for a series of advertisements on current products, and $500 for fines.What is Robinson Corporation's taxable income?

Question

Quizplus · Accepted Answer

Robinson Corporation's taxable income is calculated by adjusting the book income for tax-exempt and non-deductible items. Start with the book income of $2,000,000. Subtract the $8,000 tax-exempt interest and the $500,000 life insurance proceeds, as these are not taxable. Add back the non-deductible expenses: $25,000 of the $50,000 business meal expenses (only 50% is deductible), $4,000 life insurance premiums, and $500 fines. The taxable income is $2,000,000 - $8,000 - $500,000 + $25,000 + $4,000 + $500 = $1,521,500.

Robinson Corporation Has Income Per Books Before Tax of $2,000,000