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Mullins Corporation is classified as a PHC for the current year, reporting $263,000 of taxable ...

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Mullins Corporation is classified as a PHC for the current year, reporting $263,000 of taxable ...

Mullins Corporation is classified as a PHC for the current year, reporting $263,000 of taxable income on its federal income tax return:

Operating profit   $150,000
Long-term capital gain   20,000
Short-term capital gain   20,000
Dividends (from 25%-owned domestic corporation)   200,000
Interest   150,000
Gross income   $540,000
Minus: general and administrative expenses   ( 40,000)
Minus: salaries   ( 30,000)
"Adjusted" taxable income   $470,000
Minus: charitable contributions   ( 47,000)
Taxable income before special deductions   $423,000
Minus: dividends-received deduction   (160,000)
Taxable income    $263,000

Actual charitable contributions made by Mullins Corporation were $75,000. What are the federal income tax due and the personal holding company (PHC) tax liability? Discuss the methods (if any) by which payment of the PHC tax can be avoided.

Textbook

Prentice Hall's Federal Taxation 2014 Corporations, Partnerships, Estates & Trusts

Edition: 27^th

Authors: Anderson, Pope, Rupert

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