Question 1

Identify which of the following statements is false.

Accepted Answer

A) Brown Corporation owns 60% of Clark Corporation and 65% of Davis Corporation.Davis Corporation owns 10% of Clark Corporation,and Clark Corporation owns 10% of Davis Corporation.The remaining stock is owned by an individual shareholder.Brown,Davis,and Clark Corporations are a parent-subsidiary controlled group. 
B) There are three categories of control groups: parent-subsidiary,brother-sister,and combined. 
C) The controlled group test is applied on December 31. 
D) A controlled group must apportion certain tax benefits among its members. 
A) Brown Corporation owns 60% of Clark Corporation and 65% of Davis Corporation.Davis Corporation owns 10% of Clark Corporation,and Clark Corporation owns 10% of Davis Corporation.The remaining stock is owned by an individual shareholder.Brown,Davis,and Clark Corporations are a parent-subsidiary controlled group. 
B) There are three categories of control groups: parent-subsidiary,brother-sister,and combined. 
C) The controlled group test is applied on December 31. 
D) A controlled group must apportion certain tax benefits among its members.

Question 2

Trail Corporation has gross profits on sales of $140,000 and deductible expenses of $180,000.In addition,Trail has a net capital gain of $60,000.Trail's taxable income is

Accepted Answer

A) a $20,000 loss. 
B) a $40,000 loss. 
C) $60,000. 
D) $20,000. 
A) a $20,000 loss. 
B) a $40,000 loss. 
C) $60,000. 
D) $20,000.

Question 3

Once a corporation has elected a taxable year,it can change the taxable year without IRS permission if

Accepted Answer

A) the resulting short period has a net operating loss of $100,000 that the corporation wants to carry forward. 
B) the corporation changed its taxable year seven years ago. 
C) the corporation is not an S corporation. 
D) a corporation can change its taxable year without IRS permission in all of the above situations. 
A) the resulting short period has a net operating loss of $100,000 that the corporation wants to carry forward. 
B) the corporation changed its taxable year seven years ago. 
C) the corporation is not an S corporation. 
D) a corporation can change its taxable year without IRS permission in all of the above situations.

Question 4

Island Corporation has the following income and expense items for the year: $\begin{array}{|l|l|}
\hline \text { Gross receipts from sales }&\$60,000\
\hline \text { Dividends received from } 15 \% \text { owned domestic } & \
\text { corporation } & 40,000 \
\hline \text { Expenses connected with sales } & 30,000\
\hline 
\end{array}$ The taxable income of Island Corporation is

Accepted Answer

A) $100,000. 
B) $70,000. 
C) $47,000. 
D) $50,000. 
A) $100,000. 
B) $70,000. 
C) $47,000. 
D) $50,000.

Question 5

A new corporation may generally select one of the following accounting methods with the exception of

Accepted Answer

A) cash method. 
B) accrual method. 
C) retail method. 
D) hybrid method. 
A) cash method. 
B) accrual method. 
C) retail method. 
D) hybrid method.

Question 6

Garth Corporation donates inventory having an adjusted basis of $40,000 and an FMV of $150,000 to a qualified public charity.The inventory will be used by the charity to care for the ill.The maximum charitable contribution deduction before consideration of the 10% limitation is

Accepted Answer

A) $40,000. 
B) $55,000. 
C) $80,000. 
D) $95,000. 
A) $40,000. 
B) $55,000. 
C) $80,000. 
D) $95,000.

Question 7

NOLs arising in tax years ending after 2017 carry over to subsequent tax years indefinitely.

Accepted Answer

A) True 
 B)False

Question 8

Corporations are permitted to deduct $3,000 in net capital losses annually.

Accepted Answer

A) True 
 B)False

Question 9

Identify which of the following is false.

Accepted Answer

A) Corporations that sell real property at a gain must report an additional 20% of the entire gain as ordinary income. 
B) Corporations selling real property that previously had been depreciated using an accelerated method are subject to Sec.291. 
C) Section 291 reduces the amount of net Sec.1231 gains that can be offset by corporate capital losses. 
D) Section 291 recapture applies to Sec.1250 property. 
A) Corporations that sell real property at a gain must report an additional 20% of the entire gain as ordinary income. 
B) Corporations selling real property that previously had been depreciated using an accelerated method are subject to Sec.291. 
C) Section 291 reduces the amount of net Sec.1231 gains that can be offset by corporate capital losses. 
D) Section 291 recapture applies to Sec.1250 property.

Question 10

Identify which of the following statements is false.

Accepted Answer

A) A corporation's fiscal year generally must end on the last day of the month. 
B) A fiscal year may not end on December 31. 
C) A new corporation can elect a fiscal year that runs from February 16 to February 15 of the following year. 
D) A corporation's first tax year may not cover a full 12-month period. 
A) A corporation's fiscal year generally must end on the last day of the month. 
B) A fiscal year may not end on December 31. 
C) A new corporation can elect a fiscal year that runs from February 16 to February 15 of the following year. 
D) A corporation's first tax year may not cover a full 12-month period.

Question 11

Evans Corporation has a $15,000 net capital loss in 2017.The corporation reported the following capital gain netting in income during the past three years.Identify which of the following statements is true.
$$\begin{array} { | c | r | } 
\hline \text { Year } & \begin{array} { c } 
\text { Capital Gain } \
\text { Net Income }
\end{array} \
\hline 2014 & \$ 10,000 \
2015 & 11,000 \
2016 & 5,000 \
\hline
\end{array}$$

Accepted Answer

A) The loss is used to offset the gains from 2016 and then carried back to offset $10,000 of the gains in 2014. 
B) The loss is used to offset the $11,000 of the 2015 gains and then carried back to offset $4,000 of the year 2014 net gain. 
C) The loss is used to offset $3,000 of 2014,2015 and 2016 capital gains,remaining amount carried forward at $3,000 a year until expired. 
D) The loss is used to offset the year 2014 net gains,then $5,000 of the year 2015 net gains. 
A) The loss is used to offset the gains from 2016 and then carried back to offset $10,000 of the gains in 2014. 
B) The loss is used to offset the $11,000 of the 2015 gains and then carried back to offset $4,000 of the year 2014 net gain. 
C) The loss is used to offset $3,000 of 2014,2015 and 2016 capital gains,remaining amount carried forward at $3,000 a year until expired. 
D) The loss is used to offset the year 2014 net gains,then $5,000 of the year 2015 net gains.

Question 12

Identify which of the following statements is true.

Accepted Answer

A) The dividends-received deduction is designed to reduce double taxation of corporate dividends. 
B) The full 65% dividends-received deduction is available without restriction. 
C) If a corporation receives dividends eligible for the 65% dividends-received deduction and the 50% dividends-received deduction,the 50% dividends-received deduction reduces taxable income prior to the 65% deduction. 
D) All of the above are false. 
A) The dividends-received deduction is designed to reduce double taxation of corporate dividends. 
B) The full 65% dividends-received deduction is available without restriction. 
C) If a corporation receives dividends eligible for the 65% dividends-received deduction and the 50% dividends-received deduction,the 50% dividends-received deduction reduces taxable income prior to the 65% deduction. 
D) All of the above are false.

Question 13

Super Corporation gives a painting to a museum for public display on August 6.The painting was purchased on April 3 of the same year for $20,000 and is worth $30,000 at the date of gift.Also,Super accrues a charitable contribution on December 30 and pays the $12,000 contribution on February 1 of the next year.Super Corporation is a calendar-year corporation that uses the accrual method of accounting.Before considering the 10% limitation rule,the maximum deduction for the current year is

Accepted Answer

A) $12,000. 
B) $20,000. 
C) $30,000. 
D) $32,000. 
A) $12,000. 
B) $20,000. 
C) $30,000. 
D) $32,000.

Question 14

Which of the following items indicate that a company does not need a valuation allowance?

Accepted Answer

A) existing sales contracts that will produce sufficient income to realize the deferred tax asset 
B) excess of appreciated asset value over tax basis sufficient to realize the deferred tax asset 
C) a strong history of earnings without considering the deferred tax asset 
D) All of the above are correct. 
A) existing sales contracts that will produce sufficient income to realize the deferred tax asset 
B) excess of appreciated asset value over tax basis sufficient to realize the deferred tax asset 
C) a strong history of earnings without considering the deferred tax asset 
D) All of the above are correct.

Question 15

Identify which of the following statements is true.

Accepted Answer

A) Form 1120 Schedule L contains the corporation's income statement. 
B) Schedule M-1 (Form 1120)is an analysis of the corporation's retained earnings. 
C) Organizational expense amortized over fifteen years for purposes of determining taxable income results in an upper adjustment in the initial years to book income on the Schedule M-1 when the expense is being amortized over ten years for book income purposes. 
D) All of the above are false. 
A) Form 1120 Schedule L contains the corporation's income statement. 
B) Schedule M-1 (Form 1120)is an analysis of the corporation's retained earnings. 
C) Organizational expense amortized over fifteen years for purposes of determining taxable income results in an upper adjustment in the initial years to book income on the Schedule M-1 when the expense is being amortized over ten years for book income purposes. 
D) All of the above are false.

Question 16

In February of the current year,Brent Corporation donates computer equipment that it purchased six months ago to Eastside High School for use in its educational program.The donated property had a $20,000 adjusted basis to Brent and a $40,000 FMV.What is the amount of the gift?

Accepted Answer

A) $20,000 
B) $30,000 
C) $35,000 
D) $50,000 
A) $20,000 
B) $30,000 
C) $35,000 
D) $50,000

Question 17

Identify which of the following statements is false.

Accepted Answer

A) A corporation must file a tax return annually. 
B) A corporation can obtain an automatic six-month extension of time to file its tax return. 
C) The IRS will permit an extension of time to file a corporate return beyond the original due date only when the corporation's delay is reasonable. 
D) The IRS can rescind the extension period. 
A) A corporation must file a tax return annually. 
B) A corporation can obtain an automatic six-month extension of time to file its tax return. 
C) The IRS will permit an extension of time to file a corporate return beyond the original due date only when the corporation's delay is reasonable. 
D) The IRS can rescind the extension period.

Question 18

Dreyfuss Corporation reports the following items: Unappropriated retained earnings,beginning of year: $800,000
Net income: 700,000
Federal income tax refund for last year taken directly to retained earnings: 50,000
Cash dividends paid this year: 500,000
The unappropriated retained earnings at year-end are

Accepted Answer

A) $1,000,000. 
B) $1,050,000. 
C) $1,500,000. 
D) $2,050,030. 
A) $1,000,000. 
B) $1,050,000. 
C) $1,500,000. 
D) $2,050,030.

Question 19

Which of the following items will not create a deferred tax liability?

Accepted Answer

A) Revenues or gains are recognized earlier for book purposes than for tax purposes. 
B) Expenses or losses are deductible earlier for tax purposes than for book purposes. 
C) Tax basis of an asset is less than its book basis. 
D) Operating loss or tax credit carryforwards exist. 
A) Revenues or gains are recognized earlier for book purposes than for tax purposes. 
B) Expenses or losses are deductible earlier for tax purposes than for book purposes. 
C) Tax basis of an asset is less than its book basis. 
D) Operating loss or tax credit carryforwards exist.

Question 20

Identify which of the following statements is false.

Accepted Answer

A) The 50% dividends-received deduction is limited to 50% of the taxable income of the corporation without regard to any NOL deduction,any capital loss carryback,and the dividends-received deduction itself unless the dividends-received deduction produces an NOL. 
B) Members of an affiliated group can claim a 90% dividends-received deduction for dividends received from other group members that is not subject to a taxable income limitation. 
C) A corporate dividends-received deduction is not allowed for dividends received on stock held for 40 days. 
D) All of the above are false. 
A) The 50% dividends-received deduction is limited to 50% of the taxable income of the corporation without regard to any NOL deduction,any capital loss carryback,and the dividends-received deduction itself unless the dividends-received deduction produces an NOL. 
B) Members of an affiliated group can claim a 90% dividends-received deduction for dividends received from other group members that is not subject to a taxable income limitation. 
C) A corporate dividends-received deduction is not allowed for dividends received on stock held for 40 days. 
D) All of the above are false.

Exam 3: The Corporate Income Tax

Identify which of the following statements is false.

Trail Corporation has gross profits on sales of $140,000 and deductible expenses of $180,000.In addition,Trail has a net capital gain of $60,000.Trail's taxable income is

Once a corporation has elected a taxable year,it can change the taxable year without IRS permission if

Island Corporation has the following income and expense items for the year: Gross receipts from sales \6 0,000 Dividends received from 15\% owned domestic corporation 40,000 Expenses connected with sales 30,000 The taxable income of Island Corporation is

A new corporation may generally select one of the following accounting methods with the exception of

Garth Corporation donates inventory having an adjusted basis of $40,000 and an FMV of $150,000 to a qualified public charity.The inventory will be used by the charity to care for the ill.The maximum charitable contribution deduction before consideration of the 10% limitation is

NOLs arising in tax years ending after 2017 carry over to subsequent tax years indefinitely.

Corporations are permitted to deduct $3,000 in net capital losses annually.

Identify which of the following is false.

Identify which of the following statements is false.

Evans Corporation has a $15,000 net capital loss in 2017.The corporation reported the following capital gain netting in income during the past three years.Identify which of the following statements is true. Year Capital Gain Net Income 2014 \ 10,000 2015 11,000 2016 5,000

Identify which of the following statements is true.

Which of the following items indicate that a company does not need a valuation allowance?

Identify which of the following statements is true.

In February of the current year,Brent Corporation donates computer equipment that it purchased six months ago to Eastside High School for use in its educational program.The donated property had a $20,000 adjusted basis to Brent and a $40,000 FMV.What is the amount of the gift?

Identify which of the following statements is false.

Which of the following items will not create a deferred tax liability?

Identify which of the following statements is false.

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