Tax 496/596
Winter 2014
Research/Planning Problem #1

Reconciliation of Book Income to Taxable Income

Ramsey Corporation, a C corporation, reports the following results for the current year:
Net income per books 650,000
Federal income tax 221,000
Tax-exempt interest income 5,000
MACRS/Tax depreciation 140,000
Book depreciation 100,000
Capital loss 12,000
Insurance premiums on life of corporate
officer (Ramsey is the beneficiary of the policy) 15,000
Charitable contributions 98,000
Cash dividends paid 20,000
Dividends received from an small equity investment
own less than 10% of entity 3,000
Accrued bonus to cash basis shareholder 25,000
1. Prepare a Schedule M-1 reconciling Ramsey’s book income to it’s taxable
income in 2013.
2. Name the code section which gives the rules associated with the limitations on
the following deductions:
a. Charitable contribution
b. Capital loss
c. Dividends received deduction
3. Assume zero estimates were paid in during the year, calculate the tax due.
Ignore any type of penalties that may apply.
Do not calculate the alternative minimum tax.
Please prepare your answer in an excel spreadsheet.

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