Reference no: EM132675683
Question - Special Deductions & Limitations
Tractor Corp. is a domestic C-Corporation that assists various medium to small equipment manufacturing companies with placing their products in farming equipment supply stores throughout North and South America. Tractor Corp maintains relationships, purchases and sells products, and assists with consignment agreements and negotiations with the various supply stores in its network. Tractor Corp. adds value by saving significant overhead for the smaller manufacturing companies that struggle to compete with the large manufacturers in terms of product placement.
Tractor Corp's items of income and expense from its operations are as follows:
Revenues $25,000,000
Cost of Goods Sold $16,500,000
Officer Compensation $1,000,000
Wages & Salaries $2,000,000
Rent Expense (Corp HQ) $1,500,000
Required - Determine the tax consequences of the following transactions (consider the impact of all of these transactions together and not as separate fact patterns):
(a) Tractor Corp receives $100,000 of interest income from a Bank based on its checking account balance.
(b) Tractor Corp receives a dividend from Wheeling It, Inc., a U.S. subsidiary corporation, in the amount of $300,000 and a dividend of $50,000 from Microsoft stock. Tractor owns 85% of the stock of Wheeling It, Inc. and less than 1% of stock of Microsoft.
(c) Tractor Corp makes a charitable contribution in the amount of $750,000 to the United Way (a public charity under IRC Section 501(c)(3).
(d) Tractor Corp has an unused NOL carryforward from prior years in the amount of $1,250,000.
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