Question 1

Which of the following is not permitted an accumulated earnings credit based on reasonable needs of the business?

Accepted Answer

A)  an incorporated engineer 
B)  an operating company 
C)  an investment company 
D)  All of the above are permitted a credit based on reasonable business needs. 
A)  an incorporated engineer 
B)  an operating company 
C)  an investment company 
D)  All of the above are permitted a credit based on reasonable business needs.

Question 2

Identify which of the following statements is false.

Accepted Answer

A)  A corporation that is subject to the accumulated earnings tax may also be subject to interest and underpayment penalties on the amount of the unpaid liability. 
B)  A corporation files a Schedule PH to report its PHC tax for the tax year. 
C)  A corporation files a Schedule AE to report the amount of its accumulated earnings tax liability for the tax year. 
D)  The corporate AMT liability is reported on Form 4626. 
A)  A corporation that is subject to the accumulated earnings tax may also be subject to interest and underpayment penalties on the amount of the unpaid liability. 
B)  A corporation files a Schedule PH to report its PHC tax for the tax year. 
C)  A corporation files a Schedule AE to report the amount of its accumulated earnings tax liability for the tax year. 
D)  The corporate AMT liability is reported on Form 4626.

Question 3

When using the Bardahl formula, an increase in accounts payable (while holding purchases and operating expenses constant) has which of the following effects on the working capital requirements?

Accepted Answer

A)  decrease 
B)  increase 
C)  no effect 
D)  increase, decrease, or no effect, depending on other factors 
A)  decrease 
B)  increase 
C)  no effect 
D)  increase, decrease, or no effect, depending on other factors

Question 4

Which of the following actions cannot be used to eliminate a possible personal holding company tax liability involving a corporation owned by a mother and a father?

Accepted Answer

A)  Make a cash distribution within 2 1/2 months of the end of the tax year. 
B)  Make a deficiency distribution within 90 days of the date on which the IRS determines that a personal holding company liability is owed. 
C)  Sell additional stock to other family members. 
D)  Liquidate the corporation. 
A)  Make a cash distribution within 2 1/2 months of the end of the tax year. 
B)  Make a deficiency distribution within 90 days of the date on which the IRS determines that a personal holding company liability is owed. 
C)  Sell additional stock to other family members. 
D)  Liquidate the corporation.

Question 5

The personal holding company tax might be imposed

Accepted Answer

A)  on both partnerships and corporations. 
B)  on small business investment companies licensed by the Small Business Administration. 
C)  if more than 50% of the company is owned by five or fewer individuals for the entire year. 
D)  on companies whose gross income arises solely from rentals, if the lessors render no services to the lessees. 
A)  on both partnerships and corporations. 
B)  on small business investment companies licensed by the Small Business Administration. 
C)  if more than 50% of the company is owned by five or fewer individuals for the entire year. 
D)  on companies whose gross income arises solely from rentals, if the lessors render no services to the lessees.

Question 6

When computing the accumulated earnings tax, which of the following is not a reduction to arrive at accumulated taxable income?

Accepted Answer

A)  dividends- paid deduction 
B)  accrued federal income taxes 
C)  NOL deduction claimed 
D)  accumulated earnings credit 
A)  dividends- paid deduction 
B)  accrued federal income taxes 
C)  NOL deduction claimed 
D)  accumulated earnings credit

Question 7

Which of the following actions cannot be used to eliminate a potential accumulated earnings tax liability situation involving a corporation owned by a mother and a father?

Accepted Answer

A)  Make a deficiency distribution within 90 days of the date on which the IRS determines that an accumulated earnings tax liability is owed. 
B)  Create plans to invest retained earnings in a plant expansion. 
C)  Liquidate the corporation. 
D)  Make a cash distribution within 2 1/2 months after the end of the tax year. 
A)  Make a deficiency distribution within 90 days of the date on which the IRS determines that an accumulated earnings tax liability is owed. 
B)  Create plans to invest retained earnings in a plant expansion. 
C)  Liquidate the corporation. 
D)  Make a cash distribution within 2 1/2 months after the end of the tax year.

Question 8

Identify which of the following statements is true.

Accepted Answer

A)  The personal holding company taxes that are paid by a corporation can be used as a credit against its regular tax amount. 
B)  Income from personal service contracts are not included in personal holding company income. 
C)  Whether a corporation is subject to the personal holding company tax is determined by using two objective tests, while the determination of whether a corporation is subject to the accumulated earnings tax is determined subjectively. 
D)  All of the above are false. 
A)  The personal holding company taxes that are paid by a corporation can be used as a credit against its regular tax amount. 
B)  Income from personal service contracts are not included in personal holding company income. 
C)  Whether a corporation is subject to the personal holding company tax is determined by using two objective tests, while the determination of whether a corporation is subject to the accumulated earnings tax is determined subjectively. 
D)  All of the above are false.

Question 9

When using the Bardahl formula, an increase in annual credit sales (while holding the average accounts receivable balance constant) has which of the following effects on the working capital requirements?

Accepted Answer

A)  decrease 
B)  increase 
C)  no effect 
D)  increase, decrease, or no effect, depending on other factors 
A)  decrease 
B)  increase 
C)  no effect 
D)  increase, decrease, or no effect, depending on other factors

Question 10

Identify which of the following statements is true.

Accepted Answer

A)  Caleb Corporation is owned by a mother and her two daughters. It reports $100,000 of rental income; $30,000 of depreciation, interest, and property taxes on the rental real estate; and $10,000 of dividend income. Caleb Corporation is classified as a personal holding company. 
B)  Luke Corporation is owned by a father and his son. The corporation employs 10 individuals to provide public accounting services. Father and son make all of the work assignments for the professional employees. The professional fees earned by the corporation are personal holding company income. 
C)  The personal holding company tax is levied to prevent closely held corporations from sheltering passive income. 
D)  All of the above are false. 
A)  Caleb Corporation is owned by a mother and her two daughters. It reports $100,000 of rental income; $30,000 of depreciation, interest, and property taxes on the rental real estate; and $10,000 of dividend income. Caleb Corporation is classified as a personal holding company. 
B)  Luke Corporation is owned by a father and his son. The corporation employs 10 individuals to provide public accounting services. Father and son make all of the work assignments for the professional employees. The professional fees earned by the corporation are personal holding company income. 
C)  The personal holding company tax is levied to prevent closely held corporations from sheltering passive income. 
D)  All of the above are false.

Question 11

Church Corporation is a closely held C corporation. All of the stock is owned by Charles and Chanda Church. The corporation, in its second month of operation in its initial tax year, anticipates earning $150,000 of gross income in the current year. Gross income is expected to be approximately 40% dividends, 30% corporate bond interest, and 30% net real estate rentals (after interest, property taxes, and depreciation). Administrative expenses are expected to be $20,000. What special problems does the large amount of passive income that Church Corporation expects to earn present to you as their CPA?

Accepted Answer

The following tax issues need to be addr

Question 12

Which of the following entities is subject to the accumulated earnings tax?

Accepted Answer

A)  S corporation 
B)  personal holding company 
C)  Sec. 501 tax- exempt corporation 
D)  C corporation 
A)  S corporation 
B)  personal holding company 
C)  Sec. 501 tax- exempt corporation 
D)  C corporation

Question 13

A corporation cannot reasonably accumulate earnings to

Accepted Answer

A)  protect against pending litigation. 
B)  self- insure. 
C)  redeem stock of an elderly shareholder where such accumulation occurs prior to the shareholder's death. 
D)  fund an employee retirement plan. 
A)  protect against pending litigation. 
B)  self- insure. 
C)  redeem stock of an elderly shareholder where such accumulation occurs prior to the shareholder's death. 
D)  fund an employee retirement plan.

Question 14

Identify which of the following statements is true.

Accepted Answer

A)  Dividends that are paid in the two preceding tax years can be used as a dividend carryover to reduce the amount of the current year's personal holding company (PH
C)  tax liability. 
B)  Dividends paid by a personal holding company in the first 2 1/2 months of a tax year are automatically throwback dividends. 
C)  Consent dividends are cash dividends paid following an authorizing vote of the shareholders. 
D)  All of the above are false. 
A)  Dividends that are paid in the two preceding tax years can be used as a dividend carryover to reduce the amount of the current year's personal holding company (PH
C)  tax liability. 
B)  Dividends paid by a personal holding company in the first 2 1/2 months of a tax year are automatically throwback dividends. 
C)  Consent dividends are cash dividends paid following an authorizing vote of the shareholders. 
D)  All of the above are false.

Question 15

Identify which of the following statements is true.

Accepted Answer

A)  The accumulated earnings tax is not levied on the corporation's total accumulated earnings balance, but only on its current- year addition to the balance. 
B)  The accumulated earnings tax is applied to a corporation's earnings. If the earnings are not subsequently distributed, the earnings will be taxed again under the accumulated earnings tax the next year. 
C)  A corporation can be subject to both the accumulated earnings tax and the personal holding company tax in the same year. 
D)  All of the above are false. 
A)  The accumulated earnings tax is not levied on the corporation's total accumulated earnings balance, but only on its current- year addition to the balance. 
B)  The accumulated earnings tax is applied to a corporation's earnings. If the earnings are not subsequently distributed, the earnings will be taxed again under the accumulated earnings tax the next year. 
C)  A corporation can be subject to both the accumulated earnings tax and the personal holding company tax in the same year. 
D)  All of the above are false.

Question 16

A personal holding company cannot take a dividends- paid deduction for

Accepted Answer

A)  throwback dividends. 
B)  deficiency dividends. 
C)  consent dividends. 
D)  preferential dividends. 
A)  throwback dividends. 
B)  deficiency dividends. 
C)  consent dividends. 
D)  preferential dividends.

Question 17

Identify which of the following statements is true.

Accepted Answer

A)  A corporation accumulates earnings to fund the redemption of a shareholder's stock following her death so as to provide her estate with liquidity to pay death taxes. Such an accumulation of earnings is a reasonable business need. 
B)  A corporation's net capital gain (minus any federal income taxes paid with respect to such gain) increases the tax base for the accumulated earnings tax. 
C)  A corporation accumulates earnings to fund a buy- sell agreement. Such an accumulation of earnings is a reasonable business need. 
D)  All of the above are false. 
A)  A corporation accumulates earnings to fund the redemption of a shareholder's stock following her death so as to provide her estate with liquidity to pay death taxes. Such an accumulation of earnings is a reasonable business need. 
B)  A corporation's net capital gain (minus any federal income taxes paid with respect to such gain) increases the tax base for the accumulated earnings tax. 
C)  A corporation accumulates earnings to fund a buy- sell agreement. Such an accumulation of earnings is a reasonable business need. 
D)  All of the above are false.

Question 18

The personal holding company tax

Accepted Answer

A)  may be imposed regardless of the number of equal stockholders in a corporation. 
B)  may be eliminated by the payment of a deficiency dividend. 
C)  applies to any corporation whose shareholders satisfy the stock ownership requirement. 
D)  qualifies as a tax credit, which may be used by the shareholders to reduce their individual income taxes. 
A)  may be imposed regardless of the number of equal stockholders in a corporation. 
B)  may be eliminated by the payment of a deficiency dividend. 
C)  applies to any corporation whose shareholders satisfy the stock ownership requirement. 
D)  qualifies as a tax credit, which may be used by the shareholders to reduce their individual income taxes.

Question 19

Wind Corporation is a personal holding company. Its taxable income for this year is $100,000. The corporation's charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation. Wind's UPHCI is $95,000, assuming no other adjustments must be made.

Accepted Answer

A) True 
 B)False

Question 20

Raptor Corporation is a PHC for 2009 and reports $200,000 of taxable income on its federal income tax return.   What is Raptor's PHC tax, assuming that it does not pay any dividends?

Accepted Answer

The answer of Raptor Corporation is a PHC for 2009...

Which of the following is not permitted an accumulated earnings credit based on reasonable needs of the business?

Identify which of the following statements is false.

When using the Bardahl formula, an increase in accounts payable (while holding purchases and operating expenses constant) has which of the following effects on the working capital requirements?

Which of the following actions cannot be used to eliminate a possible personal holding company tax liability involving a corporation owned by a mother and a father?

The personal holding company tax might be imposed

When computing the accumulated earnings tax, which of the following is not a reduction to arrive at accumulated taxable income?

Which of the following actions cannot be used to eliminate a potential accumulated earnings tax liability situation involving a corporation owned by a mother and a father?

Identify which of the following statements is true.

When using the Bardahl formula, an increase in annual credit sales (while holding the average accounts receivable balance constant) has which of the following effects on the working capital requirements?

Identify which of the following statements is true.

Which of the following entities is subject to the accumulated earnings tax?

A corporation cannot reasonably accumulate earnings to

Identify which of the following statements is true.

Identify which of the following statements is true.

A personal holding company cannot take a dividends- paid deduction for

Identify which of the following statements is true.

The personal holding company tax

Wind Corporation is a personal holding company. Its taxable income for this year is $100,000. The corporation's charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation. Wind's UPHCI is $95,000, assuming no other adjustments must be made.

Raptor Corporation is a PHC for 2009 and reports $200,000 of taxable income on its federal income tax return. What is Raptor's PHC tax, assuming that it does not pay any dividends?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

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

Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

Filters

Exam 5: Other Corporate Tax Levies

Which of the following is not permitted an accumulated earnings credit based on reasonable needs of the business?

Identify which of the following statements is false.

When using the Bardahl formula, an increase in accounts payable (while holding purchases and operating expenses constant) has which of the following effects on the working capital requirements?

Which of the following actions cannot be used to eliminate a possible personal holding company tax liability involving a corporation owned by a mother and a father?

The personal holding company tax might be imposed

When computing the accumulated earnings tax, which of the following is not a reduction to arrive at accumulated taxable income?

Which of the following actions cannot be used to eliminate a potential accumulated earnings tax liability situation involving a corporation owned by a mother and a father?

Identify which of the following statements is true.

When using the Bardahl formula, an increase in annual credit sales (while holding the average accounts receivable balance constant) has which of the following effects on the working capital requirements?

Identify which of the following statements is true.

Which of the following entities is subject to the accumulated earnings tax?

A corporation cannot reasonably accumulate earnings to

Identify which of the following statements is true.

Identify which of the following statements is true.

A personal holding company cannot take a dividends- paid deduction for

Identify which of the following statements is true.

The personal holding company tax

Wind Corporation is a personal holding company. Its taxable income for this year is $100,000. The corporation's charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation. Wind's UPHCI is $95,000, assuming no other adjustments must be made.

Raptor Corporation is a PHC for 2009 and reports $200,000 of taxable income on its federal income tax return. What is Raptor's PHC tax, assuming that it does not pay any dividends?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

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

Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

Filters