Question 1

What are the various levels of stock ownership by corporate shareholders for the dividends- received deduction (DRD)? What is the DRD% for each level of ownership?

Accepted Answer

If a corporate shareholder owns less tha

Question 2

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

Accepted Answer

A)  excess of appreciated asset value over tax basis sufficient to realize the deferred tax asset 
B)  existing sales contracts that will produce sufficient income 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)  excess of appreciated asset value over tax basis sufficient to realize the deferred tax asset 
B)  existing sales contracts that will produce sufficient income 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 3

Gilbreath Corporation is a C corporation and has the following items of income and expense during the current $\begin{array}{lr}
\text { Gross Income } & \$ 100,000 \
\text { Interest Income } & 5,000 \
\text { COGS } & (70,000) \
\text { Interest Expense } & (15,000) \
\text { Depreciation } & (10,000)
\end{array}$ What is taxable income before limitation? What is the net business interest expense? What is adjusted taxable in for purposes of the net business income limitation? How much of the net business interest expense may Gilbreat deduct during the current year?

Accepted Answer

Taxable Income Before Limitati

Question 4

Cricket Corporation has a $50,000 NOL in the current year. Cricket does not have pre 2018 NOLs. Cricket expects its taxable income for next year to exceed $40,000. What issues should be considered with respect to the use of the NOL?

Accepted Answer

The primary issue is calculati

Question 5

Winter Corporation's taxable income is $500,000. In addition, Winter has the following items: $$\begin{array} { | l | r | } 
\hline \text { Depreciation for tax purposes } & \$ 60,000 \
\hline \text { Depreciation for financial accounting purposes } & 40,000 \
\hline \text { Net capital loss } & ( 2,000 \
\hline \text { Interest on loan to acquire ta-xexempt securities } & 7,000 \
\hline
\end{array}$$ What is Winter's financial accounting income?

Accepted Answer

A)  $511,000 
B)  $518,000 
C)  $513,000 
D)  $520,000 
A)  $511,000 
B)  $518,000 
C)  $513,000 
D)  $520,000

Question 6

Which of the following types of evidence indicate that a valuation allowance is needed to reduce the deferred tax asset?

Accepted Answer

A)  history of profits 
B)  existing contracts or sales backlogs, which will generate significant future income 
C)  excess of appreciated asset values over basis 
D)  short carryback or carryover periods 
A)  history of profits 
B)  existing contracts or sales backlogs, which will generate significant future income 
C)  excess of appreciated asset values over basis 
D)  short carryback or carryover periods

Question 7

Money Corporation has the following income and expenses for the tax year:
$\begin{array}{|l|l|}
\hline \text { Gross profit on sales: } & \$ 200,000 \
\hline \text { Expenses: } & 700,000 \
\hline \text { Dividends received from less- than- } 20 \% \text { - owned domestic } & 20,000\
\text { corporations: }\
\hline
\end{array}$ What is Money's net operating loss?

Accepted Answer

A)  $520,000 
B)  $494,000 
C)  $220,000 
D)  $490,000 
A)  $520,000 
B)  $494,000 
C)  $220,000 
D)  $490,000

Question 8

Exam Corporation reports taxable income of $800,000 on its federal income tax return. Given the following infor from the corporation's records, determine its book income.
Deduction for federal income taxes per $\begin{array}{lr}
\text { financial accounting records } & \$ 272,000 \
\text { Depreciation claimed on the tax return } & 140,000 \
\text { Depreciation recorded on the financial accounting records } & 80,000 \
\text { Dividends- received deduction } & 48,000 \
\text { Life insurance proceeds on death of corporate officer } & 90,000
\end{array}$

Accepted Answer

$800,000 - $272,000 + ($140,000 - $80,00

Question 9

Identify which of the following statements is true.

Accepted Answer

A)  Domestic Production Activities Deduction carry overs that originated from pre 2018 tax years are limited to 50% of taxable income until 2025. 
B)  Deductibility of business interest in a given year is limited to 80% of adjusted taxable income. 
C)  For expenses incurred after December 31, 2017, no deduction is allowed for any activities involving entertainment, amusement, or recreation, including expenses related to a facility used in connection with these activities. 
D)  The Dividends Received Deduction for individuals is limited to 50%. 
A)  Domestic Production Activities Deduction carry overs that originated from pre 2018 tax years are limited to 50% of taxable income until 2025. 
B)  Deductibility of business interest in a given year is limited to 80% of adjusted taxable income. 
C)  For expenses incurred after December 31, 2017, no deduction is allowed for any activities involving entertainment, amusement, or recreation, including expenses related to a facility used in connection with these activities. 
D)  The Dividends Received Deduction for individuals is limited to 50%.

Question 10

A C corporation must use a calendar year as its tax year unless it has a substantial business purpose to use a fiscal year.

Accepted Answer

A) True 
 B)False

Question 11

Deferred tax liabilities occur when expenses are deductible for book purposes before tax purposes.

Accepted Answer

A) True 
 B)False

Question 12

Organizational expenses incurred after 2004 are amortized over five years.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following items is a permanent difference between taxable and financial accounting income?

Accepted Answer

A)  net capital loss 
B)  depreciation 
C)  dividends- received deduction 
D)  bad debts 
A)  net capital loss 
B)  depreciation 
C)  dividends- received deduction 
D)  bad debts

Question 14

Richards Corporation has taxable income of $280,000 calculated before the charitable contribution deduction and before its dividends- received deduction of $34,000. Richards makes cash contributions of $35,000 to charitable organizations. What is Richards Corporation's charitable contribution deduction for the current year?

Accepted Answer

A)  $28,000 
B)  $35,000 
C)  $31,400 
D)  $24,600 
A)  $28,000 
B)  $35,000 
C)  $31,400 
D)  $24,600

Question 15

Walter, who owns all of the Ajax Corporation stock, purchases a truck from Ajax Corporation in January. The truck cost $12,000 and has a $10,000 adjusted basis. Walter pays the truck's $8,000 FMV. Later in the same year, Walter sells the truck to an unrelated party for $13,000. With respect to these transactions,

Accepted Answer

A)  Ajax Corporation reports no loss and Walter reports a gain of $5,000. 
B)  Ajax Corporation reports a loss of $4,000 and Walter reports a gain of $5,000. 
C)  Ajax Corporation reports a loss of $2,000 and Walter reports a gain of $5,000. 
D)  Ajax Corporation reports no loss and Walter reports a gain of $3,000. 
A)  Ajax Corporation reports no loss and Walter reports a gain of $5,000. 
B)  Ajax Corporation reports a loss of $4,000 and Walter reports a gain of $5,000. 
C)  Ajax Corporation reports a loss of $2,000 and Walter reports a gain of $5,000. 
D)  Ajax Corporation reports no loss and Walter reports a gain of $3,000.

Question 16

Webster, who owns all the Bear Corporation stock, purchases a dump truck from Bear Corporation in January. The truck cost $12,000 and has a $10,000 adjusted basis at the time of the sale. Webster pays Bear the truck's $8,000 FMV. Later in the same year, Webster sells the dump truck to an unrelated party for $6,000. Webster can recognize a loss of

Accepted Answer

A)  $4,000. 
B)  $5,000. 
C)  $2,000. 
D)  $3,000. 
A)  $4,000. 
B)  $5,000. 
C)  $2,000. 
D)  $3,000.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Lass Corporation reports a $25,000 net capital loss this year. The corporation reports the following net capital gains during the past three years. $$\begin{array} { | l | c | c | } 
\hline  { \text { Year } } & \begin{array} { c } 
\text { Net Long- Term } \
\text { C apital Gain }
\end{array} & \begin{array} { c } 
\text { Net Short- Term } \
\text { C apital Gain }
\end{array} \
\hline \text { Third previous year } & \$ 5,000 & \$ 6,000 \
\text { Year before last } & 7,000 & 3,000 \
\text { Last year } & 0 & 0 \
\hline
\end{array}$$ Determine the amount of net capital loss carried back to each preceding tax year and the amount of capital loss, i available as a carryforward.

Accepted Answer

The capital loss offsets all $11,000 of

Question 19

Beta Corporation recently purchased 100% of XYZ Corporation stock. You are their CPA. What tax issues need to be addressed before determining whether or not to file a consolidated tax return?

Accepted Answer

• Does either Beta or XYZ have losses?
•

Question 20

Identify which of the following statements is true.

Accepted Answer

A)  The Twilight Corporation purchases inventory for $5,000. Its FMV on the date it is donated to the Blue- Gray Hospital for the care of the needy is $13,000. The maximum charitable contribution deduction available for the donation is $9,000. 
B)  Corporations' charitable deductions are limited to 20% of their adjusted taxable income. 
C)  "Ordinary income property" with regard to the charitable contribution deduction does not include property whose sale would have produced a short- term capital gain. 
D)  All of the above are false. 
A)  The Twilight Corporation purchases inventory for $5,000. Its FMV on the date it is donated to the Blue- Gray Hospital for the care of the needy is $13,000. The maximum charitable contribution deduction available for the donation is $9,000. 
B)  Corporations' charitable deductions are limited to 20% of their adjusted taxable income. 
C)  "Ordinary income property" with regard to the charitable contribution deduction does not include property whose sale would have produced a short- term capital gain. 
D)  All of the above are false.

What are the various levels of stock ownership by corporate shareholders for the dividends- received deduction (DRD)? What is the DRD% for each level of ownership?

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

Cricket Corporation has a $50,000 NOL in the current year. Cricket does not have pre 2018 NOLs. Cricket expects its taxable income for next year to exceed $40,000. What issues should be considered with respect to the use of the NOL?

Which of the following types of evidence indicate that a valuation allowance is needed to reduce the deferred tax asset?

Money Corporation has the following income and expenses for the tax year: Gross profit on sales: \ 200,000 Expenses: 700,000 Dividends received from less- than- 20\% - owned domestic 20,000 corporations: What is Money's net operating loss?

Identify which of the following statements is true.

A C corporation must use a calendar year as its tax year unless it has a substantial business purpose to use a fiscal year.

Deferred tax liabilities occur when expenses are deductible for book purposes before tax purposes.

Organizational expenses incurred after 2004 are amortized over five years.

Which of the following items is a permanent difference between taxable and financial accounting income?

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

Beta Corporation recently purchased 100% of XYZ Corporation stock. You are their CPA. What tax issues need to be addressed before determining whether or not to file a consolidated tax return?

Identify which of the following statements is true.

Tax Research

Corporate Formations and Capital Structure

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

U.S. Taxation of Foreign-Related Transactions

Filters

Exam 3: The Corporate Income Tax

What are the various levels of stock ownership by corporate shareholders for the dividends- received deduction (DRD)? What is the DRD% for each level of ownership?

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

Cricket Corporation has a $50,000 NOL in the current year. Cricket does not have pre 2018 NOLs. Cricket expects its taxable income for next year to exceed $40,000. What issues should be considered with respect to the use of the NOL?

Which of the following types of evidence indicate that a valuation allowance is needed to reduce the deferred tax asset?

Money Corporation has the following income and expenses for the tax year: Gross profit on sales: \ 200,000 Expenses: 700,000 Dividends received from less- than- 20\% - owned domestic 20,000 corporations: What is Money's net operating loss?

Identify which of the following statements is true.

A C corporation must use a calendar year as its tax year unless it has a substantial business purpose to use a fiscal year.

Deferred tax liabilities occur when expenses are deductible for book purposes before tax purposes.

Organizational expenses incurred after 2004 are amortized over five years.

Which of the following items is a permanent difference between taxable and financial accounting income?

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

Beta Corporation recently purchased 100% of XYZ Corporation stock. You are their CPA. What tax issues need to be addressed before determining whether or not to file a consolidated tax return?

Identify which of the following statements is true.

Tax Research

Corporate Formations and Capital Structure

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

U.S. Taxation of Foreign-Related Transactions

Filters