Question

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: The corporation is a calendar year end and uses the accrual method of accounting. The dividends were from a domestic corporation and TSK owns 20 % of this stock. Interest income is from US Treasury Bonds. Book expenses included a $5000 penalty for late payment of Federal taxes, and $12,000 premiums on officer life insurance Book expenses included an estimated bad debt expense of $40,000. Actual bad debt write offs during the year were $19000. Tax depreciation exceeds book depreciation by $14,000. The corporation has a long term capital loss carryover of $10,000 from 2016, 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. 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 1