Exam 16: Corporate Operations

Atom Ventures Inc. (AV) owns stock in the Primo and Faraday corporations. The following summarizes information relating to AV's investment in Primo and Faraday as follows: Assuming that AV follows the general rules for reporting its income from these investments, what is the amount of AV's book-tax difference associated with the investment in these corporations (disregarding the dividends received deduction)? Is it favorable or unfavorable? Is it permanent or temporary?

The tax rate for the corporate alternative minimum tax is a flat 26%.

Bingo Corporation incurred a net operating loss in 2017. If Bingo carries the loss back, it must first carry the loss back to offset its 2016 taxable income and then carry anyremaining loss back to offset its 2015 taxable income.

A corporation may carry a net capital loss back three years and forward five years.

A corporation with an AMTI of $400,000 will have all of its AMT exemption phased-out.

The amount of a corporation's AMT is the amount of its tentative minimum tax in excess of its regular tax.

Which of the following regarding Schedule M-1 and Schedule M-3 of Form 1120 isfalse?

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 ($6,000). What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Which of the following describes the correct treatment of nonqualified stock options(NQOs) granted when ASC 718 did not apply?

Which of the following is not an AMT adjustment?

Together, Kurt and Esmeralda own 60% of three corporations: RAZ, DVA, and TRE.The three corporations would be considered as what kind of controlled group for tax purposes?

For tax purposes, a corporation may deduct the entire amount of a net capital loss in the year incurred.

Corporations may carry excess charitable contributions forward five years, but they may not carry them back.

Small corporations (in terms of average annual gross receipts) are exempt from the alternative minimum tax.

Which of the following statements regarding excess charitable contributions(contributions in excess of the modified taxable income limitation) by corporations is true?

Which of the following is deductible in calculating DRD modified taxable income?

Canny Foods Co. is considering three ways it could contribute to a local, qualified charity. First, it could give $5,000 in cash. Second, it could give stock it initiallypurchased two years ago for $4,000 but is now worth $6,000. Third, it could give items of inventory with a fair market value of $7,000 but with an adjusted basis of $3,000. Which of the following correctly describes the relation among possible charitablecontributions in terms of amount deductible for tax purposes?

In the current year, Auto Rent Corporation reported the following taxable income at the end of its first, second, and third quarters: (Use Exhibit 16-11) What amount of estimated tax payments would Auto Rent pay each quarter in order to avoid estimated tax penalties under the annualized income method of computing estimated tax payments? (Use Corporate Tax Rate Schedule.)

In 2017, LuxAir Inc. (LA) has book income of $160,000. Included in this figure is income generated from ownership in Jet Repair Corporation (JRC), of which LA owns 30%. JRC has $270,000 inearnings for the year and pays $32,000 in dividends to LA. Assuming accounting for the investment in JRC (income from JRC and the DRD) are its only book-tax differences, what is LA's tax liability for 2017? (Use Corporate Tax Rate Schedule.)

Which of the following statements is false regarding corporate estimated tax payments?