1.The Loquat Corporation has book net income of $50,000 for 2014. Included in this figure are the following items, which are reported on the corporation's Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return.
Federal income tax expense...........................................................................$7,500
Depreciation deducted on the books which is not deductible for tax purposes...............10,000
Deduction for 50 percent of meals and entertainment expense which is not allowed for tax purposes...................................................................................................4,500
Deduction for a tax penalty not allowed for tax purposes.........................................2,000
Tax-exempt interest income included in book income but not in tax income..................3,000
Calculate Loquat Corporation's taxable income for 2014 based on the information given.
2.Cypress Corporation has regular taxable income of $170,000 (assume annual gross receipts are greater than $5 million) and a regular tax liability of $49,550 for 2014. The corporation also has tax preference items amounting to $105,000. Calculate Cypress Corporation's alternative minimum tax liability. Assume Cypress Corporation is not a "small corporation" for AMT purposes.