Question 56. (LO 2) WCC, Inc. has a current year (2014) net operating loss of $10

56. (LO 2) WCC, Inc. has a current year (2014) net operating loss of $100,000. It is trying to determine whether it should carry back the loss or whether it should elect to forgo the carryback. How would you advise WCC in each of the following alternative situations (ignore time value of money in your computations)?

a.

2012 2013 2015

Taxable income $ 30,000 $ 0 $300,000

b.

2012 2013 2015

Taxable income $900,000 $60,000 $100,000

c.

2012 2013 2015

2012 2013 2015

57. (LO 2) Assume that in year 1 Hill Corporation reported a net operating loss of $10,000 that it carried forward to year 2. In year 1, Hill also reported a net capital loss of $3,000 that it carried forward to year 2. In year 2, ignoring any carryovers from other years, Hill reported a loss for tax purposes of $50,000. The current year loss includes a $12,000 net capital gain. What is Hill’s year 2 net operating loss?

58. (LO 2) Golf Corp. (GC), a calendar-year accrual-method corporation, held its directors meeting on December 15 of year 1. During the meeting the board of directors authorized GC to pay a $75,000 charitable contribution to the World Golf Foundation, a qualifying charity.

a. If GC actually pays $50,000 of this contribution on January 15 of year 2 and the remaining $25,000 on March 15 of year 2, what book-tax difference will it report associated with the contribution in year 1 (assume the 10 percent limitation does not apply)? Is it favorable or unfavorable? Is it permanent or temporary?

b. Assuming the same facts as in part a., what book-tax difference will GC report in year 2 (assuming the 10 percent limitation does not apply)? Is it favorable or unfavorable?

c. If GC actually pays $50,000 of this contribution on January 15 of year 2 and the remaining $25,000 on April 15 of year 2, what book-tax difference will it report associated with the contribution in year 1 (assume the 10 percent limitation does not apply)? Is it favorable or unfavorable? Is it permanent or temporary?

d. Assuming the same facts as in part c., what book-tax difference will GC report in year 2 (assuming the 10% limitation does not apply)? Is it favorable or unfavorable?

59. (LO 2) In year 1 (the current year), OCC Corp. made a charitable donation of $200,000 to the Phil and Amy Mickelson Foundation (a qualifying charity). For the year, OCC reported taxable income of $1,500,000 before deducting any charitable contributions, before deducting its $20,000 dividends received deduction, and before deducting its $40,000 NOL carryover from last year.

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