Exam 11: The Corporate Income Tax

During 2013,the Squamata Corporation,a regular C corporation,has $25,000 in ordinary income,a long-term capital loss of $20,000,and a short-term capital gain of $10,000. a.Calculate the Squamata Corporation's tax liability for 2013. b.Explain the nature and amount of any carrybacks or carryforwards that the corporation is entitled to use.

If a corporation is unable to deduct a capital loss against capital gains for a particular tax year,it loses the tax benefit since the loss may not be carried to other tax years.

If a corporation's status as an S corporation is involuntarily terminated in the middle of the tax year,the corporation must file as an S corporation for the first half of the tax year and a regular corporation for the second half of the tax year.

Corporations may deduct without limitation any amount of charitable contributions providing the amounts are paid to qualified organizations.

Rex and Marsha each own 50 percent of the Grandiflora Corporation,an S corporation with a calendar tax year.At the beginning of the tax year,Marsha and Rex both have a basis in the stock of the corporation of $25,000.On June 30,2013,Rex sells his interest in the corporation to George for $200,000,and for 2013 the Grandiflora Corporation has a loss of $90,000. a.Calculate the amount of the corporation's loss that may be deducted by Rex on his 2013 tax return. b.Calculate the amount of the corporation's loss that may be deducted by George on his 2013 tax return. c.Calculate the amount of the corporation's loss that may be deducted by Marsha on her 2013 tax return.

The Lagerstroemia Corporation was formed on January 1,2013.Calculate the Lagerstroemia Corporation's taxable income or loss for 2013 given the following information: Business expenses other than organizational costs and Gross receipts \ 250,000 Cost of goods sold \ 150,000 Dividend income (from 10 percent-owned domestic corporation) \3 5,000 Interest income \1 5,000 charitable contributions) \ 125,000 Charitable contributions \ 5,000 Organizational costs expensed \ 5,000 Taxable income/(loss) \

Avocado Corporation paid $3,000 in estimated tax payments for the calendar year ended December 31,2013.The corporation has an actual tax liability of $4,000 for the year. a.If no extension is requested,when is the tax return due? b.If an extension of time to file is requested and approved,when is the tax return due? c.If an extension of time to file is requested and approved,when is the additional $1,000 of the 2013 tax due?

The corporate alternative minimum tax rate is 28 percent.

A corporation may elect to take a credit for dividends paid in lieu of claiming a dividends received deduction.

What is the maximum amount of accumulated earnings that a corporation is allowed to accumulate,without regard to business needs,before the accumulated earnings tax is imposed?

Charitable contributions made by an S corporation are not deductible by the corporation;therefore,the shareholders receive no tax benefit from the contributions.

In 2013,Parvifolia,Inc.had $400,000 of revenue from operations and $160,000 of dividends from non- affiliated 15 percent-owned domestic corporations.The corporation's deductible operating expenses totaled $410,000.What is Parvifolia,Inc.'s dividends received deduction for 2013?

On July 1,2013,Grey formed Arucaria Corporation.On that same date,Grey contributed $100,000 cash and transferred property with an adjusted basis of $50,000 to Arucaria in exchange for 3,000 shares of the corporation's common stock.The property transferred had a fair market value of $85,000 on the date of the transfer.Arucaria Corporation had no other shares of common stock outstanding on July 1,2013.As a result of this transaction,Grey's basis in the stock and Arucaria Corporation's basis in the property other than the cash),respectively,are:

As a general rule,the transfer of property to a corporation in exchange for stock does not result in a taxable transaction.

If the shareholders of an S corporation voluntarily revoke the corporation's S corporation status in the sixth month of the tax year and the revocation does not specify a prospective revocation date,the corporation is a regular corporation for that tax year.

A corporation may be found subject to both the accumulated earnings tax and the personal holding company tax in the same year.

The F.Repens Corporation has taxable income of $250,000 for 2013,including dividends of $50,000 received from 30 percent-owned domestic corporations.How much is the F.Repens Corporation's dividends received deduction for 2013?

The Nandina Corporation was formed and began operations on July 1,2013,and incurred the following expenses during the year: State fees for incorporation $\quad$$\quad$$\quad$$\$ 800$ Legal and accounting fees incident to organization $\quad$ $\$ 1,500$ Legal fees for the issuance of stock $\quad$$\quad$ $\$ 600$ Temporary directors' fees $\quad$$\quad$$\quad$ $\$ 1,000$ If the corporation chooses not to expense but rather amortizes organizational costs over 180 months,what is the amount of its amortization expense for 2013?

The Great Gumball Corporation is a gumball producer.The corporation has accumulated earnings of $425,000 and it can establish a reasonable need for $360,000.Calculate the amount of the accumulated earnings tax,if any,that will be imposed on the corporation.

The Peach Corporation is a regular corporation that contributes $25,000 cash to qualified charitable organizations during 2013.The corporation has net taxable income of $200,000 before deducting the contributions. a.What is the amount of Peach Corporation's allowable deduction for charitable contributions for the current year? b.What may the corporation do with any excess amount of contributions?