Question 1

Which of the following statements regarding the taxation of corporate profits is true?

Accepted Answer

A) Dividends payments are deductible in computing corporate taxable income. 
B) The tax treatment of corporate dividends creates a bias in favor of debt financing. 
C) Corporations cannot deduct interest payments in computing corporate taxable income. 
D) Corporations with high debt-to-equity ratios have less burdensome cash flow commitments and lower risk of insolvency. 
A) Dividends payments are deductible in computing corporate taxable income. 
B) The tax treatment of corporate dividends creates a bias in favor of debt financing. 
C) Corporations cannot deduct interest payments in computing corporate taxable income. 
D) Corporations with high debt-to-equity ratios have less burdensome cash flow commitments and lower risk of insolvency.

Question 2

An affiliated group consists of a parent company that directly owns 80% of at least one subsidiary corporation plus all other subsidiaries that are 80% owned within the group.

Accepted Answer

A) True 
 B)False

Question 3

Under normal circumstances,a corporate taxpayer would prefer a $50,000 deduction to a $50,000 credit.

Accepted Answer

A) True 
 B)False

Question 4

A nondeductible charitable contribution is a permanent book/tax difference.

Accepted Answer

A) True 
 B)False

Question 5

The corporate alternative minimum tax was designed to insure that corporations with substantial economic income paid their fair share of the federal tax burden.

Accepted Answer

A) True 
 B)False

Question 6

Liston,Inc.had taxable income of $1 million for calendar year 2019.Compute Liston's regular tax liability.

Accepted Answer

A) $340,000 
B) $350,000 
C) $210,000 
D) $200,000 
A) $340,000 
B) $350,000 
C) $210,000 
D) $200,000

Question 7

This year,Sonoma Corporation received the following dividends:
   Before considering the above dividends,Sonoma has taxable income of $550,000.Calculate Sonoma's allowable dividends-received deduction and taxable income.

Accepted Answer

Dividends-received deduction:

Question 8

Bisou Inc.made a $48,200 contribution to charity this year.Only $39,000 of the contribution was deductible.Bisou can carry the $9,200 nondeductible contribution back three years and forward five years.

Accepted Answer

A) True 
 B)False

Question 9

Honu,Inc.has book income of $1,200,000.Book income includes $380,000 income tax expense,$10,000 of municipal bond interest income,and $150,000 of business meals expense.Based only on these items,compute Honu's taxable income.

Accepted Answer

A) $1,580,000 
B) $1,665,000 
C) $1,720,000 
D) $1,645,000 
A) $1,580,000 
B) $1,665,000 
C) $1,720,000 
D) $1,645,000

Question 10

Walker Inc.has accumulated minimum tax credits of $740,000 from tax years prior to 2018.Below are Walker's regular tax before credits for 2018 through 2021.
   Complete the following table to calculate Walker's allowable minimum tax credit each year.

Accepted Answer

@#IMG-DLM& 2018 refundable portion of minimum tax

Question 11

In determining the incidence of the corporate income tax:

Accepted Answer

A) Corporations may pass the tax burden onto consumers in the form of higher prices 
B) Corporate shareholders may bear the burden of the corporate tax in the form of lower return on investment 
C) Corporate employees may bear the burden of the corporate tax in the form of lower compensation 
D) All of the above parties may bear the indirect burden of the corporate income tax 
A) Corporations may pass the tax burden onto consumers in the form of higher prices 
B) Corporate shareholders may bear the burden of the corporate tax in the form of lower return on investment 
C) Corporate employees may bear the burden of the corporate tax in the form of lower compensation 
D) All of the above parties may bear the indirect burden of the corporate income tax

Question 12

For a corporate taxpayer in the 21% marginal tax bracket,a $20,000 tax credit is equivalent to a $95,238 tax deduction.

Accepted Answer

A) True 
 B)False

Question 13

Rogers,Inc.owns 12% of Lampe Corporation's voting common stock.During the current year,Rogers generated $50,000 operating income and received $8,000 dividends from Lampe.Only $2,800 of the dividend is taxable.

Accepted Answer

A) True 
 B)False

Question 14

The Schedule M-3 reconciliation requires less detailed information than the Schedule M-1 reconciliation.

Accepted Answer

A) True 
 B)False

Question 15

Wave Corporation owns 90% of the stock of Surf,Inc.Each corporation reports the following separate items for the current tax year:   Compute consolidated taxable income if Wave and Surf file a consolidated federal income tax return:

Accepted Answer

A) $400,000. 
B) $395,000. 
C) $410,000. 
D) $500,000. 
A) $400,000. 
B) $395,000. 
C) $410,000. 
D) $500,000.

Question 16

Corporate taxable income after December 31,2017 is taxed using a progressive rate schedule with a top marginal rate of 21%.

Accepted Answer

A) True 
 B)False

Question 17

Brace,Inc.owns 90% of West common stock.This year,Brace generated $50,000 operating income and received $10,000 dividends from West.Brace's taxable income is:

Accepted Answer

A) $53,000 
B) $58,000 
C) $50,000 
D) $52,000 
A) $53,000 
B) $58,000 
C) $50,000 
D) $52,000

Question 18

Assuming that the corporation has a 21% marginal tax rate,which of the following statements is true?

Accepted Answer

A) Jacky,Inc.borrowed $500,000 and paid interest of $48,000; the after-tax cost of the interest was $37,920. 
B) Jacky,Inc issued 1,000 shares of 7%,$100 par preferred stock for $100,000.The after-tax cost of the $7,000 dividend paid was $5,530. 
C) Jacky,Inc issued 1,000 shares of 7%,$100 par preferred stock for $100,000.The after-tax cost of the $7,000 dividend paid was $1,470. 
D) Jacky,Inc.borrowed $500,000 and paid interest of $48,000; the after-tax cost of the interest was $10,080. 
A) Jacky,Inc.borrowed $500,000 and paid interest of $48,000; the after-tax cost of the interest was $37,920. 
B) Jacky,Inc issued 1,000 shares of 7%,$100 par preferred stock for $100,000.The after-tax cost of the $7,000 dividend paid was $5,530. 
C) Jacky,Inc issued 1,000 shares of 7%,$100 par preferred stock for $100,000.The after-tax cost of the $7,000 dividend paid was $1,470. 
D) Jacky,Inc.borrowed $500,000 and paid interest of $48,000; the after-tax cost of the interest was $10,080.

Question 19

The minimum tax credit is an example of a nonrefundable credit.

Accepted Answer

A) True 
 B)False

Question 20

Angel Corporation's current-year regular tax liability is $40,000.Angel is eligible for a general business credit of $45,000.The corporation will receive a $5,000 refund of federal income tax.

Accepted Answer

A) True 
 B)False

Which of the following statements regarding the taxation of corporate profits is true?

An affiliated group consists of a parent company that directly owns 80% of at least one subsidiary corporation plus all other subsidiaries that are 80% owned within the group.

Under normal circumstances,a corporate taxpayer would prefer a $50,000 deduction to a $50,000 credit.

A nondeductible charitable contribution is a permanent book/tax difference.

The corporate alternative minimum tax was designed to insure that corporations with substantial economic income paid their fair share of the federal tax burden.

Liston,Inc.had taxable income of $1 million for calendar year 2019.Compute Liston's regular tax liability.

This year,Sonoma Corporation received the following dividends: Before considering the above dividends,Sonoma has taxable income of $550,000.Calculate Sonoma's allowable dividends-received deduction and taxable income.

Bisou Inc.made a $48,200 contribution to charity this year.Only $39,000 of the contribution was deductible.Bisou can carry the $9,200 nondeductible contribution back three years and forward five years.

Honu,Inc.has book income of $1,200,000.Book income includes $380,000 income tax expense,$10,000 of municipal bond interest income,and $150,000 of business meals expense.Based only on these items,compute Honu's taxable income.

Walker Inc.has accumulated minimum tax credits of $740,000 from tax years prior to 2018.Below are Walker's regular tax before credits for 2018 through 2021. Complete the following table to calculate Walker's allowable minimum tax credit each year.

In determining the incidence of the corporate income tax:

For a corporate taxpayer in the 21% marginal tax bracket,a $20,000 tax credit is equivalent to a $95,238 tax deduction.

Rogers,Inc.owns 12% of Lampe Corporation's voting common stock.During the current year,Rogers generated $50,000 operating income and received $8,000 dividends from Lampe.Only $2,800 of the dividend is taxable.

The Schedule M-3 reconciliation requires less detailed information than the Schedule M-1 reconciliation.

Wave Corporation owns 90% of the stock of Surf,Inc.Each corporation reports the following separate items for the current tax year: Compute consolidated taxable income if Wave and Surf file a consolidated federal income tax return:

Corporate taxable income after December 31,2017 is taxed using a progressive rate schedule with a top marginal rate of 21%.

Brace,Inc.owns 90% of West common stock.This year,Brace generated $50,000 operating income and received $10,000 dividends from West.Brace's taxable income is:

Assuming that the corporation has a 21% marginal tax rate,which of the following statements is true?

The minimum tax credit is an example of a nonrefundable credit.

Angel Corporation's current-year regular tax liability is $40,000.Angel is eligible for a general business credit of $45,000.The corporation will receive a $5,000 refund of federal income tax.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, partnerships, llcs, and S Corporations

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 11: The Corporate Taxpayer

Which of the following statements regarding the taxation of corporate profits is true?

An affiliated group consists of a parent company that directly owns 80% of at least one subsidiary corporation plus all other subsidiaries that are 80% owned within the group.

Under normal circumstances,a corporate taxpayer would prefer a $50,000 deduction to a $50,000 credit.

A nondeductible charitable contribution is a permanent book/tax difference.

The corporate alternative minimum tax was designed to insure that corporations with substantial economic income paid their fair share of the federal tax burden.

Liston,Inc.had taxable income of $1 million for calendar year 2019.Compute Liston's regular tax liability.

This year,Sonoma Corporation received the following dividends: Before considering the above dividends,Sonoma has taxable income of $550,000.Calculate Sonoma's allowable dividends-received deduction and taxable income.

Bisou Inc.made a $48,200 contribution to charity this year.Only $39,000 of the contribution was deductible.Bisou can carry the $9,200 nondeductible contribution back three years and forward five years.

Honu,Inc.has book income of $1,200,000.Book income includes $380,000 income tax expense,$10,000 of municipal bond interest income,and $150,000 of business meals expense.Based only on these items,compute Honu's taxable income.

Walker Inc.has accumulated minimum tax credits of $740,000 from tax years prior to 2018.Below are Walker's regular tax before credits for 2018 through 2021. Complete the following table to calculate Walker's allowable minimum tax credit each year.

In determining the incidence of the corporate income tax:

For a corporate taxpayer in the 21% marginal tax bracket,a $20,000 tax credit is equivalent to a $95,238 tax deduction.

Rogers,Inc.owns 12% of Lampe Corporation's voting common stock.During the current year,Rogers generated $50,000 operating income and received $8,000 dividends from Lampe.Only $2,800 of the dividend is taxable.

The Schedule M-3 reconciliation requires less detailed information than the Schedule M-1 reconciliation.

Wave Corporation owns 90% of the stock of Surf,Inc.Each corporation reports the following separate items for the current tax year: Compute consolidated taxable income if Wave and Surf file a consolidated federal income tax return:

Corporate taxable income after December 31,2017 is taxed using a progressive rate schedule with a top marginal rate of 21%.

Brace,Inc.owns 90% of West common stock.This year,Brace generated $50,000 operating income and received $10,000 dividends from West.Brace's taxable income is:

Assuming that the corporation has a 21% marginal tax rate,which of the following statements is true?

The minimum tax credit is an example of a nonrefundable credit.

Angel Corporation's current-year regular tax liability is $40,000.Angel is eligible for a general business credit of $45,000.The corporation will receive a $5,000 refund of federal income tax.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, partnerships, llcs, and S Corporations

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters