Exam 10: Taxation of Corporations

A partial liquidation occurs when only a few of a corporation's shareholders have their stock redeemed by a corporation.

Designate by an A if the item would be an addition to book income in determining taxable income; designate by an S if the item would be a subtraction from book income in determining taxable income. -Insurance premium on key-person life insurance. b. Tax-exempt bond interest income c. Tax depreciation in excess of book depreciation d. Fines and bribes e. Nondeductible portion of meals and entertainment f. Federal income tax g. Carryover of a charitable contribution from a prior year h. Increase in cash value of key-person life insurance i. Bad debt expense in excess of the addition to bad debt reserves j. Excess of book depreciation over tax depreciation k. Expenses related to tax-exempt income l. Excess capital losses over capital gains

Indicate by I if the following is an increase in taxable income to determine current earnings and profits or D if it is a decrease in taxable income in determining current earnings and profits. -Corporate charitable contributions in excess of 10 percent limit. b. A fine for monopolistic practices c. Net operating loss carryovers d. Life insurance proceeds e. Expenses related to tax-exempt income f. Capital loss carryovers g. Dividends received deduction h. Federal income tax refunds i. Disallowed losses on sales to related parties j. Section 179 expense in excess of allowable depreciation

Maui Corporation makes two distributions during the current tax year-the first for $20,000 on February 1 and the second for $30,000 on August 1. Before consideration of the distributions, the corporation has $18,000 in current earnings and profits and $21,000 of accumulated earnings and profits. How much of the second distribution is taxable as a dividend?

A corporation's general business credit cannot completely eliminate its income tax liability.

All corporations whose income tax liability is less than $1,000,000 in the current year can avoid an underpayment penalty if each of their estimated tax payments is 25 percent or more of their immediately preceding tax year's tax liability.

Alpha Corporation's adjusted taxable income is $100,000 for 2017 and $200,000 for 2018. Alpha makes charitable contributions of $15,000 in 2017 and $19,000 in 2018. What are Alpha's charitable contribution deductions in determining its taxable income for 2017 and 2018, respectively?

The outstanding stock of Riccardo Corporation is owned as follows: Robert owns 50% of RMD, Inc. stock. The rest of RMD, Inc. stock is owned by unrelated parties. Riccardo Corporation redeems 90 of Kyle's shares of stock for $9,000 in the only redemption transaction this year. Kyle's basis for his stock is $10 per share. Riccardo Corporation has $300,000 in E&P. What is Kyle's total basis in his remaining 10 shares of stock after the redemption?

BarBRanch has had taxable income of $450,000, $570,000, $760,000 and $680,000 in years 2015 through 2018, respectively. What were the equal minimum quarterly estimated tax payments for 2018 that BarBRanch should have made in 2018 to avoid any penalty?

Borneo Corporation has $21,000 in current earnings and profits and $5,000 of accumulated earnings and profits. Borneo distributes $20,000 of income to its shareholders on June 15 and another $10,000 on December 15. How much of the December 15 distribution is taxable as a dividend?

Which of the following could be an indication that corporate debt is disguised equity?

In determining consolidated net income, each corporation first must compute separate taxable income.

What is the difference between current earnings and profits and accumulated earnings and profits?

Badluck Corporation decided to liquidate due to the economy. It distributed its only two assets to its sole shareholder, Jason: a truck valued at $4,000 with a basis of $8,000 (original cost $24,000) and a unique machine valued at $50,000 that had a zero basis (original cost $40,000). Jason has a basis in his stock in Badluck that he purchased five years ago for $38,000. Explain the tax consequences to Badluck and Jason on the liquidation.

A corporation owns 90 percent of the voting power of a second corporation but only 70 percent of its total stock value. The corporations are:

A corporation that owns 72 percent of all the outstanding stock of another corporation:

A corporation that only has accumulated earnings and profits cannot make a dividend distribution.

In 2017, the tax rate on corporate income from $100,000 to $335,000 is a rate higher than for any other increment of corporate income. In 2018, the corporate tax rate is a flat tax rate.

What are the six characteristics of a corporation?

Maui Corporation makes two distributions during the current tax year: the first for $20,000 on February 1 and the second for $30,000 on August 1. Before consideration of the distributions, the corporation has $18,000 in current earnings and profits and $21,000 of accumulated earnings and profits. How much of the first distribution is taxable to the shareholders as a dividend?