-Rays was organized in January 2019 as a corporation in the jurisdiction of Puerto Rico. During 2020, the taxable (natural) year, it obtained the following results under the accumulation method (“accrual”) ended on December 31, 2020. Income Services $ 425,000 Dividends 28,000 Total $ 453,000 Expenses Administration 275,000 Food 12,000 Entertainment 10,000 Depreciation 10,000 Data:
X-Rays was organized in January 2019 as a corporation in the jurisdiction of Puerto Rico. During 2020, the taxable (natural) year, it obtained the following results under the accumulation method (“accrual”) ended on December 31, 2020. Income Services $ 425,000 Dividends 28,000 Total $ 453,000 Expenses Administration 275,000 Food 12,000 Entertainment 10,000 Depreciation 10,000
Data:
Dividend income comes from a domestic corporation in Puerto Rico where X-Rays owns 12% of the common stock. The corporation generated a net operating loss of $ 200,000 in 2019. The depreciation claimed under GAAP is equal to the depreciation granted for taxes.
Determine the net taxable income (loss) of X-Rays as of December 31, 2020 in Puerto Rico.
Christopher Columbus named the island San Juan Bautista after John the Baptist. The first settlement was named Puerto Rico, meaning rich port, because of the plentiful natural resources, the location, and the gold nuggets in the river.
Puerto Rico, an island in the Caribbean Sea, has been a territory of the United States since 1898 after the U.S. defeated Spain in the Spanish-American war. ... Puerto Ricans by birth have American citizenship and can move freely between the island and the U.S. mainland. But unlike Hawaii, Puerto Rico is not a state.
Puerto Rico, officially known as the Commonwealth of Puerto Rico (Estado Libre Asociado de Puerto Rico), is an unincorporated territory of the United States, located in the northeastern Caribbean, east of the Dominican Republic and west of both the U.S. Virgin Islands and the British Virgin Islands.
The gross income of a corporation generally includes business income, profits from the sale of property, interest, dividends, and the income derived from any source, unless specifically exempted by law.
A corporation’s net income is generally calculated in accordance with the method used for financial statement purposes, except for various items of income and expenses, which are treated differently. For example, the cash method of accounting may not be used by a corporation with inventory or with an average annual gross income in excess of USD 1 million. Long-term contract methods and the installment method can be used for regular tax calculations.
Inventory valuation
In general, inventory is valued at the lower of cost or market. Retail merchants can use the retail method of accounting.
Capital gains
Tax-advantaged treatment is provided for net long-term gains (holding period of more than one year) from the sale of capital assets. For corporations, net long-term capital gains, reduced by any short-term capital losses, are subject to an alternative (preferential) tax of 20% in lieu of the regular CIT rates.
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