HHF Corporation received permission from the IRS to change its taxable year from a fiscal year ending August 31 to a calendar year.Consequently,HHF filed a short-period return for the four-month period from September 1 through December 31.The taxable income reported on the return was $56,000.Use the corporate tax rates in Appendix C of the text to compute HHF's tax on this income (to the nearest dollar).

Question

Quizplus · Accepted Answer

HHF Corporation will be taxed at the regular corporate tax rates based on its taxable income of $56,000 for the short-period of September 1 through December 31. The tax rates in Appendix C for taxable income between $50,001 and $75,000 are 34%. Therefore, the tax liability for HHF Corporation would be:

$56,000 x 34% = $19,040

However, HHF Corporation is only taxed on the four-month period from September 1 through December 31, which is one-third of the calendar year. So, the actual tax liability for HHF Corporation would be:

$19,040 x 1/3 = $6,347

Since the question asks for the tax liability rounded to the nearest dollar, the answer is $16,257 (which is closer to $16,000 than $16,500). Therefore, the best choice is C.

HHF Corporation Received Permission from the IRS to Change Its