Jackson Corporation prepared the following book income statement for its year ended December 31, 2014:

Information on equipment depreciation and sale:

Equipment 1:

• Acquired March 3, 2012 for $180,000

• For books: 12-year life; straight-line depreciation

• Sold February 17, 2014 for $80,000

• For tax: Seven-year MACRS property for which the corporation made no Sec. 179 election in the acquisition year and elected out of bonus depreciation.

Equipment 2:

• Acquired February 16, 2013 for $624,000

• For books: 12-year life; straight-line depreciation

• Book depreciation in 2014: $624,000/12 = $52,000

• For tax: Seven-year MACRS property for which the corporation made the Sec. 179 election in 2013 but elected out of bonus depreciation.

Other information:

• Under the direct write-off method, Jackson deducts $15,000 of bad debts for tax purposes.

• Jackson has a $40,000 NOL carryover and a $6,000 capital loss carryover from last year.

• Jackson purchased the Invest Corporation stock (less than 20% owned) on June 21,

2012, for $25,000 and sold the stock on December 23, 2014, for $55,000.

• Jackson Corporation has qualified production activities income of $120,000.

Required:

a. For 2014, calculate Jackson’s tax depreciation deduction for Equipment 1 and

Equipment 2, and determine the tax loss on the sale of Equipment 1.

b. For 2014, calculate Jackson’s taxable income and tax liability.

c. Prepare a schedule reconciling net income per books to taxable income before special deductions (Form 1120, line 28).

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Sales Minus: Cost of goods sold Gross profit Plus: $950,000 (450,000) $500,000 Dividends received on Invest Corporation stock Gain on sale of Invest Corporation stock Total dividends and gain S 3,000 30,000 33,000 $ 59,500 22,000 105,500 70,000 Minus: Depreciation ($7,500 $52,000) Bad debt expense Other operating expenses ss on sale of Equipment 1 Total expenses and loss (257,000) Net income per books before taxes Minus: Federal income tax expense Net income per books $276,000 (90,000) $186,000 Sales prica Cost Minus: Depreciation for 2012 ( $ 80,000 $180,000 7,500 15,000 7,500 year) Depreciation for 2013 ($180,000/12) Depreciation for 2014 (h year) Total book depreciation (30,000) Book value at time of sale Book loss on sale of Equipment 1 (150,000) $(70,000)