Singer Inc’s 2004 Income statements prepared in accordance to GAAP and audited by a national accounting firm showed the following:

Net income before tax 3,097,000

Federal income tax expense per books (916,141)

State income tax expense per books (207,438)

Foreign income tax paid during 2004 (5,934)

Net income after tax 1,967,487



Singer’s records reveal the following for 2004:

a) Singer paid corporate income tax to the 12 states in which it operates. It uses 7% average rate to compute state income tax expense per books. During 2004, Singer actually paid $268,000 state income tax.

b) Singer received the following dividend income:



Zenot Inc. (New York Corp; Singer owns a 6% interest) $44,921

Riola Inc. (Florida Corp; Singer owns a 39% interest) 127,700

Strudal (Swedish Corp; Singer owns a 4% interest) 59,340



c) The foreign income credit paid was the 10% withholding tax collected by Sweden on the Strudal dividend.

d) In 1999, Singer sold 6 acres of land used as an off-site storage area for heavy equipment and materials used in its business. The original cost of this land was $646,500 and selling price was $900,000. The purchaser paid $180,000 cash and gave singer a long term note for $720,000 bal. Singer used the installment sale method to compute its taxable gain on the sale. In 2004, it received a $140,000 note payment from the purchaser ($95,000 principal plus $45,000 interest).

e) Singer had only one asset sale in 2004. It sold 1,300 shares of Zenot stock (basis $250,000) for $212,250 to an unrelated party.

f) Vandals destroyed a minivan that singer used in its business. Singer’s book basis in the van was $6,370 and its tax basis was zero. Unfortunately, Singer’s casualty insurance policy does not cover vandalism.

g) MACRS depreciation totaled $66,300 and book depreciation totaled $38,000.

h) Singer contributed $325,000 to various qualified charitable organizations.

i) Singer paid $400,000 cash dividends to its shareholders and $98,700 interest top its bondholders during 2004.

j) Singer is entitled to $14,950 general business credit in computing Singer’s 2004 federal income tax.



On the basis of the above information, Compute Singer’s 2004 federal taxable income and federal income tax payable and prepare a Schedule M-1, form 1120reconciling Singer’s 2004 book income and taxable income.