Timpanogos Inc. is an accrual-method calendar-year corporation. For 2015, it reported financial statement income after taxes of $1,149,000. Timpanogos provided the following information relating to its 2015 activities:
Life insurance proceeds as a result of CEO's death..................................$ 200,000
Revenue from sales (for both book and tax purposes)................................2,000,000
Premiums paid on the key-person life insurance policies................................21,000
The policies have no cash surrender value.
Charitable contributions....................................................................180,000
Overhead costs that were expensed for book purposes but are........................50,000
included in ending inventory for tax purposes under §263A
Overhead costs that were expensed for book purposes in 2014........................60,000
but were included in 2014 ending inventory. All 2014 ending
inventory was sold in 2015.
Cost of goods sold for book purposes...................................................300,000
Interest income on private activity tax-exempt bonds issued..........................40,000
in 2014
Interest paid on loan obtained to purchase tax-exempt bonds........................45,000
Rental income payments received and earned in 2015..................................15,000
Rental income payments received in 2014 but earned in 2015........................10,000
Rental income payments received in 2015 but not earned by..........................30,000
year-end
MACRS depreciation........................................................................55,000
Book depreciation............................................................................25,000
Alternative minimum tax depreciation....................................................50,000
Net capital loss...............................................................................45,000
Federal income tax expense for books in 2015.........................................500,000
Timpanogos did not qualify for the domestic production activities deduction.
Required:
a) Reconcile book income to taxable income for Timpanogos Inc. Be sure to start with book income and identify all of the adjustments necessary to arrive at taxable income.
b) Identify each book-tax difference as either permanent or temporary.
c) Complete Schedule M-1 for Timpanogos.
d) Compute Timpanogos Inc.'s regular tax liability for 2015.
e) Determine Timpanogos's alternative minimum tax, if any.