Reconcile book income to taxable income and identify each book–tax difference as temporary or permanent.

You will complete page 1 of the Form 1120 and the Schedule M-1 on page 5 of the Form 1120.  You do NOT need to complete the balance sheet or M-2 portions of page 5.

You will also be required to complete a book-to-tax reconciliation (see attached Excel file).  You are given the book numbers and you will input the book-tax temporary or permanent differences in the spreadsheet.  The columns foot across so your book numbers plus the adjustments, negative for debit and positive for credit, will total the taxable number.

C Corporation Tax Return Assignment

SMITH Corporation is a calendar-year corporation that began business on January 1, 2014. For 2014, it reported the following information in its current year audited income statement. Notes with important tax information are provided below.

Required:

Identify the book-to-tax adjustments for SMITH.

a) Reconcile book income to taxable income and identify each book–tax difference as temporary or permanent.

b) Compute SMITH’s regular income tax liability.

c) Complete SMITH’s Schedule M-1, page 5 of Form 1120

d) Complete SMITH’s Form 1120, page 1 (use 2013 form if 2014 form is unavailable). Ignore estimated tax penalties when completing this form.

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