Mullins Corporation Is Classified as a PHC for the Current

question 95

Essay

Mullins Corporation is classified as a PHC for the current year,reporting $263,000 of taxable income on its federal income tax return:
$\begin{array}{ll}\text { Operating profit } & \$ 150,000 \\\text { Long-term capital gain } & 20,000 \\\text { Short-term capital gain } & 20,000 \\\text { Dividends (from 25\%-owned domestic corporation) } & 200,000 \\\text { Interest } & 150,000\\\text { Gross income } & \$ 540,000 \\\text { Minus: general and administrative expenses } & (40,000) \\\text { Minus: salaries } & (30,000)\\\text { "Adjusted" taxable income } & \$ 470,000 \\\text { Minus: charitable contributions } & (47,000) \\\text { Taxable income before special deductions } & \$ 423,000 \\\text { Minus: dividends-received deduction } & (160,000 \\\text { Taxable income } & \$ 263,000\end{array}$ 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.

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Definitions:

Conscientiousness

A personality trait characterized by organization, dependability, discipline, and a strong sense of duty.

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