ACCT 553 Week 5 Assignment

Questions

14-24
What is the purpose of the dividends-received deduction? What corporations are entitled to claim this deduction? What dividends qualify for this deduction? The purpose of the dividends received deduction is so that corporations would not be taxed at a corporate level a shareholder level or if when dividends or a recipient corporation.
The dividends qualifying for the dividends-received deduction are those dividends paid by domestic corporations subject to the corporate income tax.
Only dividends paid out of a corporation's earnings and profits qualify for the dividends-received deduction. Dividends-received deduction is equal to the relevant percent (70% or 80%, depending on ownership) times the lesser of: (1) dividends received from taxable, unaffiliated domestic corporations or (2) the firm's taxable income, as adjusted Page 60 of bookshelf.
14- 51
What is the purpose of the reconciliation of taxable income with book income?
The purpose of the reconciliation of taxable income with book income would be to determine temporary and permanent differences.
The net income on the financial books of a corporation may differ from the taxable income on its return. This is caused by differences in accounting methods between financial and taxable income. Differences are either permanent differences or temporary differences. Permanent differences are income, deduction, gain, or loss items which affect either taxable income or book income, but not both. Page 96 – 97 of bookshelf.

Taxable income is just that, the income on which taxes are payable. Taxable income is different in a couple of ways. Certain expenses aren't included in taxable income; e.g., fines and penalties, some life insurance policies, etc. Other expenses are based on tax code vs. Generally Accepted Accounting Principles (GAAP;) e.g., MACRS is used for tax