James Bowen owns 100% of Bowen Corporation stock. Bowen is a calendar year, accrual method taxpayer. During
Question:
Bowen purchased the Bates stock three years ago for $30,000. Bowen holds a 28% interest, which it accounts for under GAAP using the equity method of accounting. The current carrying value for the Bates stock for book purposes is $47,300. Bowen will pay the pledge to the Girl Scouts by check on March 3 of next year. Bowens taxable income for the current year before the charitable contributions deduction, dividends-received deduction, NOL deduction, and U.S. production activities deduction is $600,000. Your tax manager has asked you to prepare a memorandum explaining how these transactions are to be treated for tax purposes and for accounting purposes. Your manager has suggested that, at a minimum, you should consult the following resources:
¢ IRC Sec. 170
¢ Accounting Standards Codification (ASC) 720
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...
Step by Step Answer:
Federal Taxation 2016 Comprehensive
ISBN: 9780134104379
29th Edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson