TSK Corp. operates a document storage company. Scott, the president owns 40% of the stock. In 2018, TSK Corp. had Book Net Income of $800,000.The following items were included in Book Net Income:

Dividend income                                                                     20,000

Interest income                                                                       10,000

Long term capital gain                                                             8,000

Federal tax expense                                                            213,000

Further discussion with Scott revealed the following additional information:

1. The corporation is a calendar year end and uses the accrual method of accounting.
2. The dividends were from a domestic corporation and TSK owns 20 % of this stock.
3. Interest income is from US Treasury Bonds.
4. Book expenses included a $5000 penalty for late payment of Federal taxes, and $12,000 premiums on officer life insurance
5. Book expenses included an estimated bad debt expense of $40,000. Actual bad debt write offs during the year were $19000.
6. Tax depreciation exceeds book depreciation by $14,000.
7. The corporation has a long term capital loss carryover of $10,000 from 2016,
8. On July 1, 2018 TSK Corporation paid a distribution of $120,000 to its shareholders. At December 31, 2017, the corporation had an accumulated deficit in earnings and profits of $ 42,000.
9. Assume a 21% tax rate.

Based on the above information compute TSK’s 2018 US taxable income and earnings and profits as of December 31, 2018.

Answer rating: 100% (QA)

Particulars Amount Amount Net income of TSK corporation 800000 Less Dividend incom... View the full answer