Question 1

Which of the following statements is false regarding consolidated tax returns?

Accepted Answer

A) An affiliated group can file a consolidated tax return only if it elects to do so. 
B) To file a consolidated tax return, one corporation must own at least 50 percent of the stock of another corporation. 
C) For a group of corporations filing a consolidated tax return, an advantage is that losses of one group member may offset gains of another group member. 
D) For a group of corporations filing a consolidated tax return, losses from certain intercompany transactions are deferred until realized through a transaction outside of the group. 
A) An affiliated group can file a consolidated tax return only if it elects to do so. 
B) To file a consolidated tax return, one corporation must own at least 50 percent of the stock of another corporation. 
C) For a group of corporations filing a consolidated tax return, an advantage is that losses of one group member may offset gains of another group member. 
D) For a group of corporations filing a consolidated tax return, losses from certain intercompany transactions are deferred until realized through a transaction outside of the group.

Question 2

Which of the following statements best describes the impact of receiving boot in a section 351 transaction?

Accepted Answer

A) Boot received has no impact on the recognition of gain or loss realized in a section 351 transaction. 
B) Boot received causes gain realized to be recognized, but not loss realized. 
C) Boot received causes loss realized to be recognized, but not gain realized. 
D) Boot received causes gain and loss realized to be recognized. 
A) Boot received has no impact on the recognition of gain or loss realized in a section 351 transaction. 
B) Boot received causes gain realized to be recognized, but not loss realized. 
C) Boot received causes loss realized to be recognized, but not gain realized. 
D) Boot received causes gain and loss realized to be recognized.

Question 3

Control as it relates to a section 351 transaction is strictly defined to be 80 percent or more of the voting power of the stock of the corporation to which property is transferred.

Accepted Answer

A) True 
 B)False

Question 4

Rachelle transfers property with a tax basis of $800 and a fair market value of $900 to a corporation in exchange for stock with a fair market value of $750 and $50 cash in a transaction that qualifies for deferral under section 351.The corporation assumed a liability of $100 on the property transferred.What is Rachelle's tax basis in the stock received in the exchange?

Accepted Answer

A) $900. 
B) $850. 
C) $750. 
D) $700. 
A) $900. 
B) $850. 
C) $750. 
D) $700.

Question 5

Which of the following is deductible in calculating DRD modified taxable income?

Accepted Answer

A) Charitable contribution deduction. 
B) Dividends received deduction. 
C) NOL carryovers. 
D) None of these choices are correct. 
A) Charitable contribution deduction. 
B) Dividends received deduction. 
C) NOL carryovers. 
D) None of these choices are correct.

Question 6

Jazz Corporation owns 10 percent of Williams Corp.'s stock.Williams distributed a $10,000 dividend to Jazz Corporation.Jazz Corp.'s taxable income (loss)before the dividend was ($2,000).What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Accepted Answer

A) $0. 
B) $4,000. 
C) $5,000. 
D) $6,500. 
E) None of the choices are correct. 
A) $0. 
B) $4,000. 
C) $5,000. 
D) $6,500. 
E) None of the choices are correct.

Question 7

By default, an affiliated group must file a consolidated tax return.

Accepted Answer

A) True 
 B)False

Question 8

During 2019, Hughes Corporation sold a portfolio of stock it had held for five years at a loss of $200,000.It also sold some investment land and recognized a capital gain of $180,000.In 2017, Hughes reported a net capital gain of $12,000 and in 2016 it recognized a net capital gain of $6,000.What is the amount of its net capital loss carryover to 2020?

Accepted Answer

$2,000, co

Question 9

On December 31, 2018, Khors Company issued nonqualified stock options to its CEO.The options fully vest on December 31, 2019, and the options were valued at $50,000 on the grant date.Ms.Svaro exercised the options on December 31, 2019.The total bargain element at the time of exercise was $40,000.For 2019, what is the nature of the book-tax difference due to the options exercised?

Accepted Answer

A) Favorable and temporary. 
B) Favorable and permanent. 
C) Unfavorable and temporary. 
D) Unfavorable and permanent. 
E) Not enough information to determine. 
A) Favorable and temporary. 
B) Favorable and permanent. 
C) Unfavorable and temporary. 
D) Unfavorable and permanent. 
E) Not enough information to determine.

Question 10

In the current year, Auto Rent Corporation reported the following taxable income at the end of its first, second, and third quarters:
 $\begin{array}{c}
\begin{array}{lll}
\
\text {Quarter}\
\text {First}\
\text {Second}\
\text {Third}
\end{array}
\begin{array}{c}
\text {Cumulative Taxable}\
\text {Income}\
\$ 1,500,000 \
 \$ 2,800,000 \
 \$ 3,600,000 
\end{array}
\end{array}$
 What amount of estimated tax payments would Auto Rent pay each quarter in order to avoid estimated tax penalties under the annualized income method of computing estimated tax payments?

Accepted Answer

First quarter $315,000; ($1,500,000 × 4

Question 11

Which of the following regarding Schedule M-1 and Schedule M-3 of Form 1120 is false?

Accepted Answer

A) In general, smaller corporations are required to complete Schedule M-1 while larger corporations are required to complete Schedule M-3. 
B) Schedule M-3 lists more specific book-tax differences than M-1. 
C) Both Schedule M-1 and M-3 reconcile to a corporation's bottom line taxable income. 
D) Schedule M-1 does not distinguish between temporary and permanent book-tax differences while Schedule M-3 does. 
A) In general, smaller corporations are required to complete Schedule M-1 while larger corporations are required to complete Schedule M-3. 
B) Schedule M-3 lists more specific book-tax differences than M-1. 
C) Both Schedule M-1 and M-3 reconcile to a corporation's bottom line taxable income. 
D) Schedule M-1 does not distinguish between temporary and permanent book-tax differences while Schedule M-3 does.

Question 12

Which of the following is not included in the corporate income tax formula?

Accepted Answer

A) Gross income 
B) Adjusted gross income 
C) Taxable income 
D) Income tax liability 
A) Gross income 
B) Adjusted gross income 
C) Taxable income 
D) Income tax liability

Question 13

Amy transfers property with a tax basis of $900 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $450 in a transaction that qualifies for deferral under section 351.The corporation assumed a liability of $150 on the property transferred.What is Amy's tax basis in the stock received in the exchange?

Accepted Answer

A) $900. 
B) $750. 
C) $650. 
D) $450. 
A) $900. 
B) $750. 
C) $650. 
D) $450.

Question 14

Boston, Inc., made a capital contribution of investment property to its 100 percent owned subsidiary, Hartford Company.The investment property had a fair market value of $1,000,000 and a tax basis to Boston of $250,000.What are the tax consequences to Boston, Inc., on the contribution of the investment property to Hartford Company and what is the tax basis of the investment property to Hartford Company after the contribution to capital?

Accepted Answer

No gain is recognized by Boston, Inc.The

Question 15

For a corporation, purchased goodwill generally leads to temporary book-tax differences.

Accepted Answer

A) True 
 B)False

Question 16

The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not an acceptable method of determining the required annual payment of federal income tax for corporations?

Accepted Answer

A) 100 percent of the prior year's tax liability (with a few exceptions). 
B) 100 percent of the current year's tax liability. 
C) 100 percent of the estimated current-year tax liability using the annualized income method. 
D) All of these choices are acceptable methods of determining the required annual payment of federal income tax for corporations. 
A) 100 percent of the prior year's tax liability (with a few exceptions). 
B) 100 percent of the current year's tax liability. 
C) 100 percent of the estimated current-year tax liability using the annualized income method. 
D) All of these choices are acceptable methods of determining the required annual payment of federal income tax for corporations.

Question 18

Accrual-method calendar-year corporations are not allowed to deduct charitable contributions unless they actually make payment to the charity by year-end.

Accepted Answer

A) True 
 B)False

Question 19

A corporation may carry a net capital loss back two years and forward 20 years.

Accepted Answer

A) True 
 B)False

Question 20

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction.The assumed liability will, as a general rule, be treated as boot received by Jane.

Accepted Answer

A) True 
 B)False

Which of the following statements is false regarding consolidated tax returns?

Which of the following statements best describes the impact of receiving boot in a section 351 transaction?

Control as it relates to a section 351 transaction is strictly defined to be 80 percent or more of the voting power of the stock of the corporation to which property is transferred.

Which of the following is deductible in calculating DRD modified taxable income?

Jazz Corporation owns 10 percent of Williams Corp.'s stock.Williams distributed a $10,000 dividend to Jazz Corporation.Jazz Corp.'s taxable income (loss)before the dividend was ($2,000).What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

By default, an affiliated group must file a consolidated tax return.

Which of the following regarding Schedule M-1 and Schedule M-3 of Form 1120 is false?

Which of the following is not included in the corporate income tax formula?

For a corporation, purchased goodwill generally leads to temporary book-tax differences.

The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

Which of the following is not an acceptable method of determining the required annual payment of federal income tax for corporations?

Accrual-method calendar-year corporations are not allowed to deduct charitable contributions unless they actually make payment to the charity by year-end.

A corporation may carry a net capital loss back two years and forward 20 years.

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction.The assumed liability will, as a general rule, be treated as boot received by Jane.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Filters

Exam 13: Corporate Formations and Operations

Which of the following statements is false regarding consolidated tax returns?

Which of the following statements best describes the impact of receiving boot in a section 351 transaction?

Control as it relates to a section 351 transaction is strictly defined to be 80 percent or more of the voting power of the stock of the corporation to which property is transferred.

Which of the following is deductible in calculating DRD modified taxable income?

Jazz Corporation owns 10 percent of Williams Corp.'s stock.Williams distributed a $10,000 dividend to Jazz Corporation.Jazz Corp.'s taxable income (loss)before the dividend was ($2,000).What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

By default, an affiliated group must file a consolidated tax return.

Which of the following regarding Schedule M-1 and Schedule M-3 of Form 1120 is false?

Which of the following is not included in the corporate income tax formula?

For a corporation, purchased goodwill generally leads to temporary book-tax differences.

The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

Which of the following is not an acceptable method of determining the required annual payment of federal income tax for corporations?

Accrual-method calendar-year corporations are not allowed to deduct charitable contributions unless they actually make payment to the charity by year-end.

A corporation may carry a net capital loss back two years and forward 20 years.

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction.The assumed liability will, as a general rule, be treated as boot received by Jane.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Filters