1 answer

Owl is a closely held corporation owned by 8 shareholders (each has 12.5% of the stock)....

Question:

Owl is a closely held corporation owned by 8 shareholders (each has 12.5% of the stock). Selected financial information provided by Owl follows:

Taxable income $6,250,000

Positive AMT adjustments (excluding ACE adjustment) 600,000

Negative AMT adjustments (30,000) Tax preferences 5,000,000

Retained earnings 900,000 Accumulated E & P 2,000,000

ACE adjustment 750,000

a. If Owl is a C corporation, compute the following:

Regular Federal income tax liability:

$ Alternative minimum taxable income (AMTI):

Alternate minimum tax (AMT):

Income Tax Rates—Corporations Taxable Income The Tax is: But not Over- Of the Amount Over- Over- 0 50,000 75,000 100,000 335,

Please provide the calculations.

Income Tax Rates—Corporations Taxable Income The Tax is: But not Over- Of the Amount Over- Over- 0 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 15% 7,500 + 25% 13,750 + 34% 22,250 + 39% 113,900 + 34% 3,400,000 + 35% 5,150,000 + 38% 50,000 75,000 100,000 335,000 10,000,000 15,000,000 35%

Answers

Ans.(a). Regular Federal Income Tax Liability = $113,900 + [($6,250,000 - $335,000) x 34%] = $2,125,000

$ Alternative minimum taxable income (AMTI) = $6,250,000 + $600,000 - $30,000 + $5,000,000 +$750,000 = $12,570,000

Alternate minimum tax (AMT) = $12,570,000 x 20% = $2,514,000

.

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