COST OF GOODS SOLD
Cost of goods sold is a deduction on a taxpayer’s taxable income. For tax purposes, Piratephernalia Corporation must capitalize a portion of their overhead expenses into the annual inventory calculation. Additionally, cost of goods sold includes only the inventory sold throughout the fiscal year. Unsold purchased inventory will not be deducted from the taxable income.
INTEREST INCOME
Generally, state bond interest is exempt from taxation. Further, interest income from loans with rates below the market rate will be recognized and taxed at the market rate. In the case of Piratephernalia’s employee loan, tax law requires the corporation to report interest income at the market rate rather than the stated rate in the loan agreement.
LOSS ON SALE OF STOCK
Tax law prevents the capital loss on the sale of the Barbossa stock from being deducted in the year of the sale. Piratephernalia may, however, carry over this loss to offset future capital gains the corporation may encounter. If similar situations are to arise, we are available to discuss …show more content…
If Piratephernalia’s adjusted taxable income is negative, a charitable contribution in the current year will not be elected for a deduction in the year of loss. Rather, the deduction must be carried over to benefit future years. Assuming Piratephernalia shows a positive adjusted taxable income, the corporation may elect to deduct a portion of their charitable contributions paid out during the year. The remaining amount may be carried forward to deduct against adjusted taxable income in future years. In this case, the 2014 charitable contribution deduction is limited to a portion of Piratephernalia’s adjusted taxable income. The remaining amount may be carried forward provided there is a positive adjusted taxable income in the following
Cost of goods sold is a deduction on a taxpayer’s taxable income. For tax purposes, Piratephernalia Corporation must capitalize a portion of their overhead expenses into the annual inventory calculation. Additionally, cost of goods sold includes only the inventory sold throughout the fiscal year. Unsold purchased inventory will not be deducted from the taxable income.
INTEREST INCOME
Generally, state bond interest is exempt from taxation. Further, interest income from loans with rates below the market rate will be recognized and taxed at the market rate. In the case of Piratephernalia’s employee loan, tax law requires the corporation to report interest income at the market rate rather than the stated rate in the loan agreement.
LOSS ON SALE OF STOCK
Tax law prevents the capital loss on the sale of the Barbossa stock from being deducted in the year of the sale. Piratephernalia may, however, carry over this loss to offset future capital gains the corporation may encounter. If similar situations are to arise, we are available to discuss …show more content…
If Piratephernalia’s adjusted taxable income is negative, a charitable contribution in the current year will not be elected for a deduction in the year of loss. Rather, the deduction must be carried over to benefit future years. Assuming Piratephernalia shows a positive adjusted taxable income, the corporation may elect to deduct a portion of their charitable contributions paid out during the year. The remaining amount may be carried forward to deduct against adjusted taxable income in future years. In this case, the 2014 charitable contribution deduction is limited to a portion of Piratephernalia’s adjusted taxable income. The remaining amount may be carried forward provided there is a positive adjusted taxable income in the following