Exam 11: The Corporate Taxpayer

Maxwell,Inc.had taxable income of $2,500,000 for its fiscal year ended June 30,2018.Compute Maxwell's regular tax liability.

Thunder,Inc.has invested in the stock of several corporations and has $500,000 current year operating income before dividends: Calculate Thunder's dividends-received deduction and taxable income:

Airfreight Corporation has book income of $370,000.Book income includes a $25,000 gain realized on a like-kind nontaxable exchange of realty.Based only on these items,compute Airfreight's taxable income.

A corporation that is unable to meet its original filing deadline may obtain an automatic twelve-month extension of the time to file its federal income tax return.

Fleet,Inc.owns 85% of the stock of Pete,Inc.and 35% of the stock of Zete,Inc.and 90% of the stock of Stock ownership of Bete,Inc.Bete owns 5% of the stock of Pete and 5% of the stock of Zete.Zete owns 10% of the stock of Bete.The remaining stock of Pete and Zete is owned by unrelated individuals.Which of the following statements is correct?

Frazier,Inc.paid a $150,000 cash dividend to its shareholders.The corporation cannot deduct this payment on its corporate income tax return.

A corporation is required to report differences between book and taxable income on either Schedule M-1 or Schedule M-3 of the corporate income tax return.

Corporations are allowed a deduction for charitable contributions,limited to 10 percent of taxable income before the deduction.

The corporate characteristic of free transferability exists if the corporate stock is subject to a buy-sell agreement.

Which of the following statements regarding the current year tax treatment of corporate dividends is true?

Corporate taxable income earned before December 31,2017 is taxed using a rate schedule that includes rates ranging from 15% to 39%.

Poppy's book income of $739,300 includes a net long-term capital loss of $42,000 and federal income tax expense of $170,000.Based only on these items,Poppy's taxable income is:

The federal tax law considers the member corporations of an affiliated group to be a single entity for federal tax purposes.

The four primary legal characteristics of a corporation are unlimited liability,limited life,free transferability of interests,and centralized management.

New York,Inc.owns 100% of Brooklyn,Inc.and Queens,Inc.Taxable income for the three corporations for their first year was as follows: Which of the following statements is false?

Torquay Inc.'s (a calendar-year taxpayer)2018 taxable income was $15,837,850,and its tax liability was $3,325,948.Torquay's director of tax estimates that the corporation's 2019 taxable income will be $13,350,000.Compute Torquay's 2019 estimated tax payment due on April 15,2019.

Weston Corporation has accumulated minimum tax credits of $134,000 from tax years prior to 2018.If 2018 regular tax before credits is $47,000 and Jackson qualifies for general business credits of $14,000,its allowable minimum tax credit for 2018 is:

Corporate taxable income after December 31,2017 is taxed at a flat rate of 21%.

Franton Co.,a calendar year,accrual basis corporation,reported $2,076,000 net income after tax on its current year financial statements prepared in accordance with GAAP.The corporation's financial records reveal the following information. -Federal tax expense per books was $660,000. -Franton received $22,400 of dividends from its investment in Microsoft and General Motors stock. -Bad debt expense was $12,900,and write-offs of uncollectible accounts receivable totaled $16,300. -Book depreciation was $110,890,and MACRS depreciation was $94,700. -Franton paid a $50,000 fine to the City of Albany for illegal trash dumping. Compute Franton's taxable income and regular tax liability.

Joanna has a 35% marginal tax rate and owns 100% of the stock of Loman Corporation.This year,Loman generated $400,000 of taxable income,paid $84,000 of corporate income tax,and paid a $50,000 dividend to Joanna.Suppose that the federal income tax system has been amended to allow shareholders to gross up dividend income by the corporate tax paid with respect to the dividend and credit this tax against their individual tax.Further assume that dividends-received by individuals are not eligible for a preferential tax rate.Calculate Joanna's reported dividend income and her tax due on the dividend.