Question 1

Both Schedules M-1 and M-3 require taxpayers to identify book-tax differences as either temporary or permanent.

Accepted Answer

A) True 
 B)False

Question 2

It is important to distinguish between temporary and permanent book-tax differences for which of the following reasons?

Accepted Answer

A)  Certain corporations are required to disclose book-tax differences as permanent or temporary on their tax returns. 
B)  Temporary book-tax differences will reverse in future years whereas permanent differences will not. 
C)  Both temporary book-tax differences will reverse in future years whereas permanent differences will not and certain corporations are required to disclose book-tax differences as permanent or temporary on their tax returns are reasons for why a corporation might distinguish between temporary and permanent differences. 
D)  Neither temporary nor permanent book-tax differences will reverse in future years nor are certain corporations required to disclose book-tax differences as permanent or temporary on their tax returns. 
A)  Certain corporations are required to disclose book-tax differences as permanent or temporary on their tax returns. 
B)  Temporary book-tax differences will reverse in future years whereas permanent differences will not. 
C)  Both temporary book-tax differences will reverse in future years whereas permanent differences will not and certain corporations are required to disclose book-tax differences as permanent or temporary on their tax returns are reasons for why a corporation might distinguish between temporary and permanent differences. 
D)  Neither temporary nor permanent book-tax differences will reverse in future years nor are certain corporations required to disclose book-tax differences as permanent or temporary on their tax returns.

Question 3

For book purposes, RadioAircast Inc. reported $15,000 of income from municipal bonds in 2017. It also expensed $12,000 of radio station filing fines paid to the FCC the same year. What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the total adjustment is permanent and what amount is temporary?

Accepted Answer

$3,000, favorable bo

Question 4

Corporations may carry a net operating loss sustained in the current year back two years and forward 20 years.

Accepted Answer

A) True 
 B)False

Question 5

Corporation A receives a dividend from Corporation B. Corporation A includes the dividend in its gross income for tax and financial accounting purposes (no book-tax difference). If A has accounted for the dividend correctly (following the general rule), how much of B stock does A own?

Accepted Answer

A)  A owns at least 20 but not more than 50 percent of the stock of B. 
B)  A owns more than 50 percent of the stock of B. 
C)  A owns less than 20 percent of the stock of B. 
D)  Cannot be determined. 
A)  A owns at least 20 but not more than 50 percent of the stock of B. 
B)  A owns more than 50 percent of the stock of B. 
C)  A owns less than 20 percent of the stock of B. 
D)  Cannot be determined.

Question 6

In 2014, Smith Traders Inc. reported taxable income of $100,000. In 2015, it reported taxable income of $15,000. In 2016, it reported taxable income of $95,000. In 2017, Smith Tradersexperienced a net operating loss of $25,000. What amount of refund can Smith Traders receive if it does not elect to forgo the carry back (see the Corporate Tax Rate Schedule.) ?

Accepted Answer

$5,650, co

Question 7

Remsco has taxable income of $60,000 and a charitable contribution limit modifiedtaxable income of $72,000. Its charitable contributions for the year were $7,500. What isRemsco's current-year charitable contribution deduction and contribution carryover?

Accepted Answer

A)  $7,200 current-year deduction; $300 carryover. 
B)  $6,000 current-year deduction; $1,500 carryover. 
C)  $7,500 current-year deduction; $0 carryover. 
D)  $1,200 current-year deduction; $6,300 carryover. 
A)  $7,200 current-year deduction; $300 carryover. 
B)  $6,000 current-year deduction; $1,500 carryover. 
C)  $7,500 current-year deduction; $0 carryover. 
D)  $1,200 current-year deduction; $6,300 carryover.

Question 8

Corporation A receives a dividend from Corporation B. It includes the dividend in gross income for tax purposes but includes a pro-rata portion of B's earnings in its financial accounting income. If A has accounted for the dividend correctly (using the general rule), how much of B's stock does A own?

Accepted Answer

A)  A owns at least 20 but not more than 50 percent of the stock of B. 
B)  A owns less than 20 percent of the stock of B. 
C)  A owns more than 50 percent of the stock of B. 
D)  Cannot be determined. 
A)  A owns at least 20 but not more than 50 percent of the stock of B. 
B)  A owns less than 20 percent of the stock of B. 
C)  A owns more than 50 percent of the stock of B. 
D)  Cannot be determined.

Question 9

Which of the following is unnecessary to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity?

Accepted Answer

A)  Approval from the IRS prior to making the contribution. 
B)  Approval of the payment from the board of directors. 
C)  Payment made within three and one-half months of the tax year-end. 
D)  All of the choices are necessary. 
A)  Approval from the IRS prior to making the contribution. 
B)  Approval of the payment from the board of directors. 
C)  Payment made within three and one-half months of the tax year-end. 
D)  All of the choices are necessary.

Question 10

AR Systems Inc. (AR) had $120,000 of tax liability last year. It anticipates a current-year taxliability of $500,000. Assuming AR is considered a large corporation for purposes of estimating tax liability, what are the minimum estimated tax payments it should make to avoid underpaymentpenalties? Ignore the annualized income method.

Accepted Answer

Q1: $30,000, Q2: $220,000, Q3: $125,000,

Question 11

Which of the following statements regarding nonqualified stock options (NQOs) isfalse?

Accepted Answer

A)  If ASC 718 does not apply, all stock option-related book-tax differences are temporary. 
B)  Before ASC 718 applied, no expense recognition was required for NQOs for financial accounting purposes. 
C)  In a given year when ASC 718 applies, if the value of the options that accrue is greater than the bargain element of options exercised, the book-tax difference for that year is unfavorable. 
D)  If ASC 718 applies, book-tax differences associated with NQOs may be either permanent or temporary. 
A)  If ASC 718 does not apply, all stock option-related book-tax differences are temporary. 
B)  Before ASC 718 applied, no expense recognition was required for NQOs for financial accounting purposes. 
C)  In a given year when ASC 718 applies, if the value of the options that accrue is greater than the bargain element of options exercised, the book-tax difference for that year is unfavorable. 
D)  If ASC 718 applies, book-tax differences associated with NQOs may be either permanent or temporary.

Question 12

Net operating losses generally create permanent book-tax differences.

Accepted Answer

A) True 
 B)False

Question 13

Jazz Corporation owns 10% of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before the dividend was ($2,000). What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Accepted Answer

A)  $7,000. 
B)  $8,000. 
C)  $0. 
D)  $5,600. 
E)  None of the choices are correct. 
A)  $7,000. 
B)  $8,000. 
C)  $0. 
D)  $5,600. 
E)  None of the choices are correct.

Question 14

Corporations calculate adjusted gross income (AGI) in the same way as individuals.

Accepted Answer

A) True 
 B)False

Question 15

Income that is included in book income, but excluded from taxable income, results in afavorable, permanent book-tax difference.

Accepted Answer

A) True 
 B)False

Question 16

Z Corporation has AMTI of $250,000, which exceeds the AMT exemption phase-out threshold by $100,000. What is Z's tentative minimum tax?

Accepted Answer

A)  $30,000. 
B)  $47,000. 
C)  $40,000. 
D)  $45,000. 
A)  $30,000. 
B)  $47,000. 
C)  $40,000. 
D)  $45,000.

Question 17

Omnidata uses the annualized income method to determine its quarterly federal income tax payments. It had $100,000, $50,000, and $90,000 of taxable income for the first, second, and third quarters, respectively ($240,000 in total through the first threequarters). What is Omnidata's annual estimated taxable income as of the end of the third quarter?

Accepted Answer

A)  $480,000. 
B)  $300,000. 
C)  $400,000. 
D)  $320,000. 
A)  $480,000. 
B)  $300,000. 
C)  $400,000. 
D)  $320,000.

Question 18

GenerUs Inc.'s board of directors approved a charitable cash contribution to FoodBank, a qualified non-profit organization, in November of 2017. GenerUs made payment to FoodBank on February 2, 2018. GenerUs Inc. (a calendar-year corporation) may claim a deduction for the contribution on its 2017 tax return.

Accepted Answer

A) True 
 B)False

Question 19

The dividends received deduction cannot cause a net operating loss. The deduction can reduce income to zero but not below zero.

Accepted Answer

A) True 
 B)False

Question 20

An unfavorable temporary book-tax difference is so named because it causes taxableincome to decrease relative to book income.

Accepted Answer

A) True 
 B)False

Both Schedules M-1 and M-3 require taxpayers to identify book-tax differences as either temporary or permanent.

It is important to distinguish between temporary and permanent book-tax differences for which of the following reasons?

Corporations may carry a net operating loss sustained in the current year back two years and forward 20 years.

Corporation A receives a dividend from Corporation B. Corporation A includes the dividend in its gross income for tax and financial accounting purposes (no book-tax difference). If A has accounted for the dividend correctly (following the general rule), how much of B stock does A own?

Remsco has taxable income of $60,000 and a charitable contribution limit modifiedtaxable income of $72,000. Its charitable contributions for the year were $7,500. What isRemsco's current-year charitable contribution deduction and contribution carryover?

Which of the following is unnecessary to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity?

Which of the following statements regarding nonqualified stock options (NQOs) isfalse?

Net operating losses generally create permanent book-tax differences.

Jazz Corporation owns 10% of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before the dividend was ($2,000). What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Corporations calculate adjusted gross income (AGI) in the same way as individuals.

Income that is included in book income, but excluded from taxable income, results in afavorable, permanent book-tax difference.

Z Corporation has AMTI of $250,000, which exceeds the AMT exemption phase-out threshold by $100,000. What is Z's tentative minimum tax?

The dividends received deduction cannot cause a net operating loss. The deduction can reduce income to zero but not below zero.

An unfavorable temporary book-tax difference is so named because it causes taxableincome to decrease relative to book income.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 16: Corporate Operations

Both Schedules M-1 and M-3 require taxpayers to identify book-tax differences as either temporary or permanent.

It is important to distinguish between temporary and permanent book-tax differences for which of the following reasons?

Corporations may carry a net operating loss sustained in the current year back two years and forward 20 years.

Corporation A receives a dividend from Corporation B. Corporation A includes the dividend in its gross income for tax and financial accounting purposes (no book-tax difference). If A has accounted for the dividend correctly (following the general rule), how much of B stock does A own?

Remsco has taxable income of $60,000 and a charitable contribution limit modifiedtaxable income of $72,000. Its charitable contributions for the year were $7,500. What isRemsco's current-year charitable contribution deduction and contribution carryover?

Which of the following is unnecessary to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity?

Which of the following statements regarding nonqualified stock options (NQOs) isfalse?

Net operating losses generally create permanent book-tax differences.

Jazz Corporation owns 10% of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before the dividend was ($2,000). What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Corporations calculate adjusted gross income (AGI) in the same way as individuals.

Income that is included in book income, but excluded from taxable income, results in afavorable, permanent book-tax difference.

Z Corporation has AMTI of $250,000, which exceeds the AMT exemption phase-out threshold by $100,000. What is Z's tentative minimum tax?

The dividends received deduction cannot cause a net operating loss. The deduction can reduce income to zero but not below zero.

An unfavorable temporary book-tax difference is so named because it causes taxableincome to decrease relative to book income.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters