Question

Help Please

Shimmer Inc. is a calendar-year-end, accrual-method corporation. This year, it sells the following long-term assets: Asset Building Sparkle Corporation stock Sales Price $752,888 219,882 Cost $749,880 254,880 Accumulated Depreciation $34,080 n/a Shimmer does not sell any other assets during the year, and its taxable income before these transactions is $847.000. What are Shimmer's taxable income and tax liability for the year? (Assume a Corporate Income tax rate as 21%.) Taxable income Tax liability

Answer 1

Shimmer's taxable income as follows:

	Sale Price (A)	Carrying value = Cost - accumulated Depr.           (B)	Gain or loss (A-B)
Building	$752,000	$715,000	$37,000
Sparkle's stock	$219,000	$254,000	($35,000)
Total			$2,000
Add: Taxable income before adjustment			$847,000
Adjusted taxable income			$849,000

_______________________________________________________________________

Compute tax liability:

Tax liability = $849,000 $\times$ 21% = $178,290

Note: As no tax rate schedule given in the problem.