Question 1

Identify which of the following statements is true.

Accepted Answer

A) A corporation can be subject to both the accumulated earnings tax and the personal holding company tax in the same year. 
B) The accumulated earnings tax is applied to a corporation's earnings.If the earnings are not subsequently distributed,the earnings will be taxed again under the accumulated earnings tax the next year. 
C) The accumulated earnings tax is not levied on the corporation's total accumulated earnings balance,but only on its current-year addition to the balance. 
D) All of the above are false. 
A) A corporation can be subject to both the accumulated earnings tax and the personal holding company tax in the same year. 
B) The accumulated earnings tax is applied to a corporation's earnings.If the earnings are not subsequently distributed,the earnings will be taxed again under the accumulated earnings tax the next year. 
C) The accumulated earnings tax is not levied on the corporation's total accumulated earnings balance,but only on its current-year addition to the balance. 
D) All of the above are false.

Question 2

In years beginning in 2018 through 2020,any minimum tax credit carryover from prior alternative minimum tax.years will be allowed to the extent of the regular tax liability plus 50% of the excess of the minimum tax credit over the amount credited against the regular tax.

Accepted Answer

A) True 
 B)False

Question 3

Which of following generally does not indicate an unreasonable earnings accumulation?

Accepted Answer

A) loans to shareholders 
B) expenditure of corporate funds for the personal benefit of the shareholders 
C) planned expansion of business facilities 
D) investments in properties or securities unrelated to the activities of the corporation 
A) loans to shareholders 
B) expenditure of corporate funds for the personal benefit of the shareholders 
C) planned expansion of business facilities 
D) investments in properties or securities unrelated to the activities of the corporation

Question 4

What is a personal holding company?

Accepted Answer

A personal holding company is any corpor

Question 5

Identify which of the following statements is true.

Accepted Answer

A) The personal holding company tax is levied to prevent closely held corporations from sheltering passive income. 
B) Caleb Corporation is owned by a mother and her two daughters.It reports $100,000 of rental income; $30,000 of depreciation,interest,and property taxes on the rental real estate; and $10,000 of dividend income.Caleb Corporation is classified as a personal holding company. 
C) Luke Corporation is owned by a father and his son.The corporation employs 10 individuals to provide public accounting services.Father and son make all of the work assignments for the professional employees.The professional fees earned by the corporation are personal holding company income. 
D) All of the above are false. 
A) The personal holding company tax is levied to prevent closely held corporations from sheltering passive income. 
B) Caleb Corporation is owned by a mother and her two daughters.It reports $100,000 of rental income; $30,000 of depreciation,interest,and property taxes on the rental real estate; and $10,000 of dividend income.Caleb Corporation is classified as a personal holding company. 
C) Luke Corporation is owned by a father and his son.The corporation employs 10 individuals to provide public accounting services.Father and son make all of the work assignments for the professional employees.The professional fees earned by the corporation are personal holding company income. 
D) All of the above are false.

Question 6

Identify which of the following statements is true.

Accepted Answer

A) The personal holding company taxes that are paid by a corporation can be used as a credit against its regular tax amount. 
B) Whether a corporation is subject to the personal holding company tax is determined by using two objective tests,while the determination of whether a corporation is subject to the accumulated earnings tax is determined subjectively. 
C) Income from personal service contracts are not included in personal holding company income. 
D) All of the above are false. 
A) The personal holding company taxes that are paid by a corporation can be used as a credit against its regular tax amount. 
B) Whether a corporation is subject to the personal holding company tax is determined by using two objective tests,while the determination of whether a corporation is subject to the accumulated earnings tax is determined subjectively. 
C) Income from personal service contracts are not included in personal holding company income. 
D) All of the above are false.

Question 7

Identify which of the following statements is false.

Accepted Answer

A) The 80% dividends-received deduction can be claimed when computing a corporation's undistributed personal holding company income (UPHCI). 
B) Rental expenses in excess of rental income are added back to taxable income to arrive at personal holding company income (PHCI). 
C) Wind Corporation is a personal holding company.Its taxable income for this year is $100,000.The corporation's charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation.Wind's UPHCI is $95,000,assuming no other adjustments must be made. 
D) The PHC tax is assessed at 20%. 
A) The 80% dividends-received deduction can be claimed when computing a corporation's undistributed personal holding company income (UPHCI). 
B) Rental expenses in excess of rental income are added back to taxable income to arrive at personal holding company income (PHCI). 
C) Wind Corporation is a personal holding company.Its taxable income for this year is $100,000.The corporation's charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation.Wind's UPHCI is $95,000,assuming no other adjustments must be made. 
D) The PHC tax is assessed at 20%.

Question 8

When computing the accumulated earnings tax,which of the following is not a reduction to arrive at accumulated taxable income?

Accepted Answer

A) accumulated earnings credit 
B) NOL deduction claimed 
C) accrued federal income taxes 
D) dividends-paid deduction 
A) accumulated earnings credit 
B) NOL deduction claimed 
C) accrued federal income taxes 
D) dividends-paid deduction

Question 9

Wind Corporation is a personal holding company.Its taxable income for this year is $100,000.The corporation's charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation.Wind's UPHCI is $95,000,assuming no other adjustments must be made.

Accepted Answer

A) True 
 B)False

Question 10

Identify which of the following statements is true.

Accepted Answer

A) The Bardahl formula is based on the firm's inventory period,receivables period,credit period,and total cash expenditures for cost of sales and operating expenses. 
B) The Bardahl formula uses the concept of working capital,cash over current liabilities. 
C) The Bardahl formula provides mathematical exactness when calculating reasonable working capital needs for accumulated earnings tax purposes. 
D) All of the above are false. 
A) The Bardahl formula is based on the firm's inventory period,receivables period,credit period,and total cash expenditures for cost of sales and operating expenses. 
B) The Bardahl formula uses the concept of working capital,cash over current liabilities. 
C) The Bardahl formula provides mathematical exactness when calculating reasonable working capital needs for accumulated earnings tax purposes. 
D) All of the above are false.

Question 11

A low tax bracket individual can enhance the avoidance of income taxes through a C corporation by having the corporation retain its after tax earnings rather than paying them out as a dividend.

Accepted Answer

A) True 
 B)False

Question 12

In determining accumulated taxable income for the purpose of the accumulated earnings tax,which one of the following is allowed as a deduction?

Accepted Answer

A) excess charitable contributions 
B) dividends-received deduction 
C) net operating loss deduction 
D) net capital loss for the current year 
A) excess charitable contributions 
B) dividends-received deduction 
C) net operating loss deduction 
D) net capital loss for the current year

Question 13

A corporation cannot reasonably accumulate earnings to

Accepted Answer

A) protect against pending litigation. 
B) fund an employee retirement plan. 
C) self-insure. 
D) redeem stock of an elderly shareholder where such accumulation occurs prior to the shareholder's death. 
A) protect against pending litigation. 
B) fund an employee retirement plan. 
C) self-insure. 
D) redeem stock of an elderly shareholder where such accumulation occurs prior to the shareholder's death.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Which of the following actions cannot be used to eliminate a potential accumulated earnings tax liability situation involving a corporation owned by a mother and a father?

Accepted Answer

A) Create plans to invest retained earnings in a plant expansion. 
B) Make a cash distribution within 2 1/2 months after the end of the tax year. 
C) Make a deficiency distribution within 90 days of the date on which the IRS determines that an accumulated earnings tax liability is owed. 
D) Liquidate the corporation. 
A) Create plans to invest retained earnings in a plant expansion. 
B) Make a cash distribution within 2 1/2 months after the end of the tax year. 
C) Make a deficiency distribution within 90 days of the date on which the IRS determines that an accumulated earnings tax liability is owed. 
D) Liquidate the corporation.

Question 16

When using the Bardahl formula,an increase in annual credit sales (while holding the average accounts receivable balance constant)has which of the following effects on the working capital requirements?

Accepted Answer

A) increase 
B) decrease 
C) no effect 
D) increase,decrease,or no effect,depending on other factors 
A) increase 
B) decrease 
C) no effect 
D) increase,decrease,or no effect,depending on other factors

Question 17

Identify which of the following statements is true.

Accepted Answer

A) A corporation accumulates earnings to fund the redemption of a shareholder's stock following her death so as to provide her estate with liquidity to pay death taxes.Such an accumulation of earnings is a reasonable business need. 
B) A corporation accumulates earnings to fund a buy-sell agreement.Such an accumulation of earnings is a reasonable business need. 
C) A corporation's net capital gain (minus any federal income taxes paid with respect to such gain)increases the tax base for the accumulated earnings tax. 
D) All of the above are false. 
A) A corporation accumulates earnings to fund the redemption of a shareholder's stock following her death so as to provide her estate with liquidity to pay death taxes.Such an accumulation of earnings is a reasonable business need. 
B) A corporation accumulates earnings to fund a buy-sell agreement.Such an accumulation of earnings is a reasonable business need. 
C) A corporation's net capital gain (minus any federal income taxes paid with respect to such gain)increases the tax base for the accumulated earnings tax. 
D) All of the above are false.

Question 18

When using the Bardahl formula,an increase in accounts payable (while holding purchases and operating expenses constant)has which of the following effects on the working capital requirements?

Accepted Answer

A) increase 
B) decrease 
C) no effect 
D) increase,decrease,or no effect,depending on other factors 
A) increase 
B) decrease 
C) no effect 
D) increase,decrease,or no effect,depending on other factors

Question 19

The personal holding company tax

Accepted Answer

A) may be imposed regardless of the number of equal stockholders in a corporation. 
B) may be eliminated by the payment of a deficiency dividend. 
C) qualifies as a tax credit,which may be used by the shareholders to reduce their individual income taxes. 
D) applies to any corporation whose shareholders satisfy the stock ownership requirement. 
A) may be imposed regardless of the number of equal stockholders in a corporation. 
B) may be eliminated by the payment of a deficiency dividend. 
C) qualifies as a tax credit,which may be used by the shareholders to reduce their individual income taxes. 
D) applies to any corporation whose shareholders satisfy the stock ownership requirement.

Question 20

Identify which of the following statements is true.

Accepted Answer

A) Payment of deficiency dividends will prevent the imposition of the accumulated earnings tax. 
B) All corporations are exempt from the accumulated earnings tax on their first $250,000 of accumulated earnings. 
C) A health service corporation can claim an accumulated earnings credit of $250,000. 
D) All of the above are false. 
A) Payment of deficiency dividends will prevent the imposition of the accumulated earnings tax. 
B) All corporations are exempt from the accumulated earnings tax on their first $250,000 of accumulated earnings. 
C) A health service corporation can claim an accumulated earnings credit of $250,000. 
D) All of the above are false.

Exam 5: Other Corporate Tax Levies

Identify which of the following statements is true.

In years beginning in 2018 through 2020,any minimum tax credit carryover from prior alternative minimum tax.years will be allowed to the extent of the regular tax liability plus 50% of the excess of the minimum tax credit over the amount credited against the regular tax.

Which of following generally does not indicate an unreasonable earnings accumulation?

What is a personal holding company?

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is false.

When computing the accumulated earnings tax,which of the following is not a reduction to arrive at accumulated taxable income?

Wind Corporation is a personal holding company.Its taxable income for this year is $100,000.The corporation's charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation.Wind's UPHCI is $95,000,assuming no other adjustments must be made.

Identify which of the following statements is true.

A low tax bracket individual can enhance the avoidance of income taxes through a C corporation by having the corporation retain its after tax earnings rather than paying them out as a dividend.

In determining accumulated taxable income for the purpose of the accumulated earnings tax,which one of the following is allowed as a deduction?

A corporation cannot reasonably accumulate earnings to

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

Which of the following actions cannot be used to eliminate a potential accumulated earnings tax liability situation involving a corporation owned by a mother and a father?

When using the Bardahl formula,an increase in annual credit sales (while holding the average accounts receivable balance constant)has which of the following effects on the working capital requirements?

Identify which of the following statements is true.

When using the Bardahl formula,an increase in accounts payable (while holding purchases and operating expenses constant)has which of the following effects on the working capital requirements?

The personal holding company tax

Identify which of the following statements is true.

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