Question

KAI, a calendar year corporation, reported $500,000 net income before tax on its financial statements prepared in accordance with GAAP. The corporation’s records reveal the following information:
• KAI received an $80,000 insurance reimbursement for the theft of equipment with a $62,000 book basis and a $58,000 tax basis. KAI used $75,000 to replace the equipment and the remaining $5,000 to pay Christmas bonuses.
• KAI exchanged investment real estate with a $250,000 book and tax basis for commercial real estate with a $600,000 FMV. Compute KAI’s taxable income. In making your computation, assume that the corporation defers the recognition of gain when possible.


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  • CreatedNovember 03, 2015
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