Toro Inc.received permission from the IRS to change its taxable year from a fiscal year ending July 31 to a calendar year.Consequently,Toro filed a short-period return for the five-month period from August 1 through December 31.The taxable income reported on the return was $65,000.Use the corporate tax rates in Appendix C of the text to compute Toro's tax on this income (to the nearest dollar).

Question

Quizplus · Accepted Answer

To compute the tax, we need to annualize the short-period income and then apply the corporate tax rates. The annualized income is $65,000 * (12/5) = $156,000. Using the corporate tax rates, the tax on $156,000 is calculated, and then prorated for the 5-month period. The correct tax amount is $18,371.

Toro IncReceived Permission from the IRS to Change Its Taxable Year