Tax Practice Project
Your tax practice has prepared the tax return for your client, Timpanogos, Inc. It was a stressful period. However, you had the opportunity to learn about your new client’s business and their tax situation. In Unit 6, you will make a presentation to the company. You will provide an overview of your client’s tax situation based on the tax return you completed in Unit 5, and offer strategies for reducing taxes in subsequent years (post-tax filing advisory).
Using Microsoft® PowerPoint®, present (a) an overview of your client’s tax situation, (b) the tax returns and the notes to the returns you prepared in Unit 5, and (c) offer strategies for reducing taxes in subsequent years. Use bulleted-points on 10–20 PowerPoint slides and provide notes to the slides. On your final slide, list all participating members and indicate the task(s) each completed.
Explanation & Answer length: 210 slides.
Timpanogos inc. Book-to-tax reconciliation For the year 2020 Book income Dr Cr Taxable income Revenue from sales 2000000 2000000 Cost of goods sold -300000 -300000 Gross profit 1700000 1700000 Interest income 40000 40000 Rental income 15000 15000 10000 10000 Other income received and earned in 2020 Rental income received in 2019 Rental income 30000 30000 received in 2020 but not earned Gross income 1795000 1765000 Expenses Life insurance proceeds as a result of the death of the CEO 200000 200000 Premiums paid for key 21000 21000 person life insurance Charitable 180000 contributions Interest on income on 40000 -40000 45000 -45000 tax-exempt Interest on paid loans to purchase taxexempt bonds Tax depreciation 55000 55000 55000 Book depreciation 25000 25000 25000 Net capital loss 42000 Federal income tax for 310000 42000 310000 books in 2020 Total expenses -918000 -5000 Net income 877000 1760000 Question b. Temporary differences in tax are caused by the differences in tax base and the number of assets carried, including the revenue from sales and the cost of goods sold. Permanent tax forms the difference that occurs between the tax and the report. And this will include the expenses and the revenue and capital, which don’t change over time.
Question c. M-1 schedule Timpanogos Inc. Schedule M-1 1 Net income per books 877000 2 Federal income tax per books 310000 3 Rental income received in 2020 but not 30000 earned 4 Income subject to tax not recorded on books this year 5 Tax depreciation 55000 6 Interest income 40000 7 Book depreciation 25000 8 Rental income received and earned 15000 Rent income received in 2019 and earned in 10000 2020 Question d. Compute the Timpanogos inc. tax liability for 2020 gross income-interest on loan-tax exemption 1795000-45000-40000=1710000 $1710000 References Ayers, B., Barrick, J., Lewis, T., Robinson, J., Weaver, C., & Worsham, R.. Taxation of business entities (2021 ed.). McGraw Hill. Here’s the professor comment from my answer on the top They varied a bit from the authors. That life insurance proceeds are a plus. rental income should be 25,000. On part a, rental income is 20,000. Life ins proceeds are 200,000. tax forms 64. Timpanogos Inc. is an accrual-method, calendar-year corporation. For 2020, it reported financial statement income after taxes of $1,342,000.
Timpanogos provided the following information relating to its 2020 activities: Life insurance proceeds as a result of CEO’s death Revenue from sales (for both book and tax purposes) Premiums paid on the key-person life insurance policies. The policies have no cash surrender value. Charitable contributions Cost of goods sold for book and tax purposes Interest income on tax-exempt bonds Interest paid on loan obtained to purchase tax-exempt bonds Rental income payments received and earned in 2020 Rental income payments received in 2019 but earned in 2020 Rental income payments received in 2020 but not earned by year-end Tax depreciation Book depreciation Net capital loss Federal income tax expense for books in 2020 $ 200,000 2,000,000 21,000 180,000 300,000 40,000 45,000 15,000 10,000 30,000 55,000 25,000 42,000 310,000 Required: a) Reconcile book income to taxable income for Timpanogos Inc. Be sure to start with book income and identify all of the adjustments necessary to arrive at taxable income. b) Identify each book-tax difference as either permanent or temporary. c) Complete Schedule M-1 for Timpanogos. Page 5-40 d) Compute Timpanogos Inc.’s tax liability for 2020.
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