Mullins Corporation is classified as a PHC for the current year, reporting $263,000 of taxable income on its federal income tax return:

Operating profit $150,000

Long-term capital gain 20,000

Short-term capital gain 20,000

Dividends (from 25%-owned domestic corporation)200,000

Interest 150,000

Gross income $540,000

Minus: general and administrative expenses( 40,000)

Minus: salaries ( 30,000)

"Adjusted" taxable income $470,000

Minus: charitable contributions ( 47,000)

Taxable income before special deductions$423,000

Minus: dividends-received deduction (160,000)

Taxable income $263,000

Actual charitable contributions made by Mullins Corporation were $75,000. What are the federal income tax due and the personal holding company (PHC) tax liability? Discuss the methods (if any) by which payment of the PHC tax can be avoided.

Answer rating: 100% (QA)

The federal income tax due is equal to the taxable incom... View the full answer