Exam 11: The Corporate Taxpayer

Aaron,Inc.is a nonprofit corporation that collects and distributes food for needy families.Aaron,Inc.also operates a small grocery store for profit.Which of the following statements is true?

After 2017,a 1.4% excise tax applies to the net investment income of all colleges and universities.

When price competition is fierce,the incidence of the corporate income tax

Most tax credits for which a corporate taxpayer would be eligible are nonrefundable.

Gosling,Inc.,a calendar year,accrual basis corporation,reported $756,000 net income after tax on its financial statements prepared in accordance with GAAP.The corporation's financial records reveal the following information: -Gosling earned $3,500 on an investment in tax-exempt municipal bonds. -Gosling received an advance payment of rent this year for $25,000.This amount was not included in book income. -Gosling's depreciation expense per books was $72,000,and its MACRS depreciation deduction was $105,000. -Gosling recorded $58,000 of business meals and $27,000 of entertainment expense for book purposes. -Gosling's federal income tax expense per books was $220,000. a.Compute Gosling's taxable income and regular tax liability. b.Prepare a Schedule M-1,page 5,Form 1120,reconciling Gosling's book and taxable income.

Westside,Inc.owns 15% of Innsbrook's common stock.This year,Westside generated $50,000 operating income and received $20,000 dividends from Innsbrook.Westside's taxable income is:

In terms of dispersal of ownership,corporations are classified as either closely held or publicly held.

The stock of Wheel Corporation,a U.S.company,is publicly traded,with no single shareholder owning more than 5 percent of its outstanding stock.Wheel owns 90 percent of the outstanding stock of Axle,Inc,also a U.S.company.Axle owns 100% of the outstanding stock of Tire Corporation,a German company.Wheel and Tire each own 50 percent of the outstanding stock of Bumper,Inc.,a U.S.company.Wheel and Axle each own 50 percent of the outstanding stock of Trunk Corporation,a U.S.company.Which of these corporations form an affiliated group eligible to file a consolidated tax return?

Loda Inc.made an $8,300 nondeductible charitable contribution and a $2,000 nondeductible political contribution this year.Which of the following statements is true?

Fleet,Inc.owns 85% of the stock of Pete,Inc.and 35% of the stock of Zete,Inc.The remaining stock of Pete and Zete is owned by unrelated individuals.Which of the following statements is correct?

Cranston Corporation has accumulated minimum tax credits of $924,000 from tax years prior to 2018.If 2018 regular tax before credits is $152,000,Cranston's allowable minimum tax credit for 2018 is:

Corporations are rarely targeted in political debates over taxation.

If a corporation has accumulated minimum tax credits from tax years prior to 2018,100 percent of such credits are refundable on their 2018 tax return.

Corporation F owns 95 percent of the outstanding stock of Corporation G.This year,the corporations' records provide the following information: a.Compute each corporation's taxable income if they file separate tax returns. b.Compute consolidated taxable income if Corporation F and Corporation G file a consolidated tax return.

The stock of closely held corporations is typically restricted as to transferability by some type of buy-sell agreement and cannot be sold on the open market.

When price competition is fierce,companies easily shift the burden of a tax increase to their customers via higher prices.

The corporate characteristic of limited liability is generally more important to the shareholders than the characteristic of centralized management.

After 2017,a 100% dividends-received deduction is permitted for any dividends received from a foreign corporation.

At least three corporations are required to form an affiliated group.

The double taxation of corporate earnings is one of the dominant characteristics of the federal income tax system.