Exam 10: Taxation of Corporations

Whyley Corporation, a C corporation, has gross profits on sales of $50,000 and deductible expenses of $60,000. In addition, Whyley has a net capital gain of $30,000. Whyley's taxable income is:

Tom owns 60 percent of CDF Corporation. CDF rents a building from Tom for $4,500 per month. Fair rental value for the building is only $3,000 per month. In addition, CDF employs Tom's son as the general manager at a salary of $350,000 annually. Similar positions in similar businesses pay $200,000 annually. How much rental and dividend income should Tom report on his tax return for the year?

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

What do the M-1 and M-2 schedules on a Form 1120 show?

Which of these is not considered an advantage of the corporate business form?

Who is a disqualified person?

Chum Corporation distributed $20,000 cash to George, its sole Class A common stockholder in May of the current year and it made a $20,000 cash distribution to Bennie its sole Class B common stockholder in December of the current year. The corporation has $15,000 in current earnings and profits for the year and $18,000 in accumulated earnings and profits. How will the corporation identify the distribution to George and Bennie?

Bamboo Corporation has $130,000 of operating income, a $20,000 long-term capital loss, a $10,000 dividend from a corporation in which it owns 5 percent of the shares, and a charitable contribution of $18,000. What is the corporation's taxable income and income tax? Identify any carryovers.

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

An exempt organization has dividend income of $200,000. It receives contributions of $350,000 and grants totaling $175,000. Is this a private foundation?

Monroe Corporation reported the following results for the current year: In addition to the above, Monroe Corporation has a $5,000 NOL carryforward available from last year. What is Monroe Corporation's taxable income for the current year?

What avenues are available to a corporation to obtain capital for operations?

Marlin Inc., a calendar-year corporation, has gross income from operations of $160,000 and dividend income of $100,000 from a 25% owned domestic corporation for the current year. Deductible business expenses for the year are $170,000. What is Marlin's dividend received deduction for this year?

A corporation is subject to both the personal holding company tax and the accumulated earnings tax. Its regular taxable income is $200,000. Its adjusted taxable income for imposing the personal holding company tax is $170,000 and its taxable income for determining the accumulated earnings tax is $230,000. What is the corporation's total tax liability?

A corporation must have positive earnings and profits in both its current earnings and profits account and its accumulated earnings and profits account to make a taxable dividend distribution.

What is the limit for corporate charitable contribution deductions?

The local garden club, an exempt organization, had gross unrelated business income during the year of $14,000. Its costs associated with this income were $8,900. What is its unrelated business income tax in 2018?

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 Robert's shares of stock for $9,000 in the only redemption transaction this year. Robert's basis for his stock is $10 per share (100 shares @ $10 = $1,000). Riccardo Corporation has $300,000 in E&P. How much capital gain or dividend income does Robert recognize as a result of this redemption?

Casey Corporation has three assets when it decides to liquidate: The corporation sells the stock for its fair market value and distributes the other two assets to its sole shareholder. What is its tax liability on its final tax return in 2018 if it had $45,000 of income from operations prior to liquidating?

A corporation has pre-tax book income of $324,000. In determining this income, the corporation included $2,000 of tax-exempt interest, $6,000 of dividends from an affiliated corporation, a capital loss of $50,000 and $3,000 of excess book depreciation. What is the corporation's taxable income?