Question 1

For a corporation, goodwill created in an asset acquisition generally leads to temporarybook-tax differences.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements regarding charitable contributions is false?

Accepted Answer

A)  Corporations can qualify to deduct a contribution before actually paying the contribution to the charity. 
B)  Charitable contribution deductions are subject to a limitation based on the corporation's taxable income (before certain deductions). 
C)  The amount deductible for non-cash contributions is always the adjusted basis of the property donated. 
D)  Only contributions made to qualified charitable organizations are deductible. 
A)  Corporations can qualify to deduct a contribution before actually paying the contribution to the charity. 
B)  Charitable contribution deductions are subject to a limitation based on the corporation's taxable income (before certain deductions). 
C)  The amount deductible for non-cash contributions is always the adjusted basis of the property donated. 
D)  Only contributions made to qualified charitable organizations are deductible.

Question 3

Which of the following is not a type of controlled group as defined in the InternalRevenue Code?

Accepted Answer

A)  Brother-sister. 
B)  Parent-subsidiary. 
C)  Combined. 
D)  All of the choices are types of controlled groups. 
A)  Brother-sister. 
B)  Parent-subsidiary. 
C)  Combined. 
D)  All of the choices are types of controlled groups.

Question 4

Coop Inc. owns 40% of Chicken Inc., both Coop and Chicken are corporations. Chicken pays Coop a dividend of $10,000 in the current year. Chicken also reports financialaccounting earnings of $20,000 for that year. Assume that Coop follows the general rule of accounting for investment in Chicken. What is the amount and nature of the book-tax difference to Coop associated with the dividend distribution (ignoring the dividendsreceived deduction)?

Accepted Answer

A)  $10,000 favorable. 
B)  $2,000 favorable. 
C)  $2,000 unfavorable. 
D)  $10,000 unfavorable. 
E)  None of the choices are correct. 
A)  $10,000 favorable. 
B)  $2,000 favorable. 
C)  $2,000 unfavorable. 
D)  $10,000 unfavorable. 
E)  None of the choices are correct.

Question 5

Corporations have a larger standard deduction than individual taxpayers because theygenerally have higher revenues.

Accepted Answer

A) True 
 B)False

Question 6

A corporation may carry a net capital loss back two years and forward 20 years.

Accepted Answer

A) True 
 B)False

Question 7

For incentive stock options granted when ASC 718 applies, the value of the options that accrue in a given year always creates a permanent, unfavorable book-tax difference.

Accepted Answer

A) True 
 B)False

Question 8

Most corporations use the annualized income method to determine their required annual payment for purposes of making quarterly estimated payments.

Accepted Answer

A) True 
 B)False

Question 9

A corporation with a minimum tax credit carryover may reduce regular tax down to the amount of its tentative minimum tax when its regular tax exceeds its tentative minimum tax.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following describes the correct treatment of the exercise of nonqualified stock options (NQOs) that were granted when ASC 718 applies?

Accepted Answer

A)  Financial-expense value over vesting period; tax-no deduction. 
B)  Financial-expense value over vesting period; tax-deduct bargain element at exercise. 
C)  Financial-no expense; tax-deduct bargain element at exercise. 
D)  Financial-no expense; tax-no deduction. 
A)  Financial-expense value over vesting period; tax-no deduction. 
B)  Financial-expense value over vesting period; tax-deduct bargain element at exercise. 
C)  Financial-no expense; tax-deduct bargain element at exercise. 
D)  Financial-no expense; tax-no deduction.

Question 11

AmStore Inc. sold some of its heavy machinery at a gain. AmStore used the straight-line method for financial accounting depreciation and MACRS for tax cost-recovery. If accumulated depreciation for financial accounting purposes is less than accumulated depreciation for tax reporting purposes, what is the nature of the book-tax differenceassociated with the gain on the sale?

Accepted Answer

A)  Permanent; unfavorable. 
B)  Permanent; favorable. 
C)  Temporary; favorable. 
D)  Temporary; unfavorable. 
A)  Permanent; unfavorable. 
B)  Permanent; favorable. 
C)  Temporary; favorable. 
D)  Temporary; unfavorable.

Question 12

Corporations compute their dividends received deduction by multiplying the dividend amount by 10%, 50%, or 100% depending on their ownership in the distributingcorporation's stock.

Accepted Answer

A) True 
 B)False

Question 13

TrendSetter Inc. paid $50,000 in premiums for life insurance coverage for its key employees for which TrendSetter Inc. is the beneficiary. What is the nature of the book-tax difference created by this expense?

Accepted Answer

A)  Permanent; unfavorable. 
B)  Temporary; unfavorable. 
C)  Permanent; favorable. 
D)  Temporary; favorable. 
A)  Permanent; unfavorable. 
B)  Temporary; unfavorable. 
C)  Permanent; favorable. 
D)  Temporary; favorable.

Question 14

Which of the following statements regarding book-tax differences associated with purchased goodwill is false?

Accepted Answer

A)  In a year when goodwill is impaired and yet fully amortized for tax purposes (so no tax amortization of the goodwill for that year), the book-tax difference will be unfavorable. 
B)  Temporary book-tax differences associated with goodwill are always favorable. 
C)  If goodwill has been fully amortized for tax purposes in a previous year, the book-tax difference is equal to the amount of impairment recognized. 
D)  It is possible to have no book-tax difference in a year when there is no goodwill amortization for tax purposes. 
A)  In a year when goodwill is impaired and yet fully amortized for tax purposes (so no tax amortization of the goodwill for that year), the book-tax difference will be unfavorable. 
B)  Temporary book-tax differences associated with goodwill are always favorable. 
C)  If goodwill has been fully amortized for tax purposes in a previous year, the book-tax difference is equal to the amount of impairment recognized. 
D)  It is possible to have no book-tax difference in a year when there is no goodwill amortization for tax purposes.

Question 15

In January 2016, Khors Company issues nonqualified stock options to its CEO, Jenny Svaro. Because the company does not expect Ms. Svaro to leave the company, the options vest at the time they are granted with a total value of $50,000. In December of2017, the company experiences a surge in its stock price, and Ms. Svaro exercises the options. The total bargain element at the time of exercise is $60,000. For 2017, what is the book-tax difference due to the options exercised?

Accepted Answer

A)  10,000 unfavorable. 
B)  10,000 favorable. 
C)  60,000 favorable. 
D)  50,000 unfavorable. 
A)  10,000 unfavorable. 
B)  10,000 favorable. 
C)  60,000 favorable. 
D)  50,000 unfavorable.

Question 16

Jazz Corporation owns 50% of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income before the dividend was$100,000. What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Accepted Answer

A)  $10,000. 
B)  $8,000. 
C)  $7,000. 
D)  $0. 
A)  $10,000. 
B)  $8,000. 
C)  $7,000. 
D)  $0.

Question 17

Controlled group provisions in the tax law prevent taxpayers from splitting a corporation into several smaller corporations to take advantage of low marginal corporate tax rates at low levels of income.

Accepted Answer

A) True 
 B)False

Question 18

During 2017, Hughes Corporation sold a portfolio of stock it had held for five years at a loss of$200,000. It also sold some investment land and recognized a capital gain of $180,000. In 2015, Hughes reported a net capital gain of $12,000 and in 2016 it recognized a net capital gain of $6,000. What is the amount of its net capital loss carryover to 2018?

Accepted Answer

$2,000, co

Question 19

Taxable income of the most profitable corporations is subject to a flat 35% tax rate.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not an acceptable method of determining the required annual payment of federal income tax for corporations?

Accepted Answer

A)  100 percent of the prior year's tax liability (with a few exceptions). 
B)  100 percent of the estimated current year tax liability using the annualized income method. 
C)  100 percent of the current year's tax liability. 
D)  All of the choices are acceptable methods of determining the required annual payment of federal income tax for corporations. 
A)  100 percent of the prior year's tax liability (with a few exceptions). 
B)  100 percent of the estimated current year tax liability using the annualized income method. 
C)  100 percent of the current year's tax liability. 
D)  All of the choices are acceptable methods of determining the required annual payment of federal income tax for corporations.

Exam 16: Corporate Operations

For a corporation, goodwill created in an asset acquisition generally leads to temporarybook-tax differences.

Which of the following statements regarding charitable contributions is false?

Which of the following is not a type of controlled group as defined in the InternalRevenue Code?

Corporations have a larger standard deduction than individual taxpayers because theygenerally have higher revenues.

A corporation may carry a net capital loss back two years and forward 20 years.

For incentive stock options granted when ASC 718 applies, the value of the options that accrue in a given year always creates a permanent, unfavorable book-tax difference.

Most corporations use the annualized income method to determine their required annual payment for purposes of making quarterly estimated payments.

A corporation with a minimum tax credit carryover may reduce regular tax down to the amount of its tentative minimum tax when its regular tax exceeds its tentative minimum tax.

Which of the following describes the correct treatment of the exercise of nonqualified stock options (NQOs) that were granted when ASC 718 applies?

Corporations compute their dividends received deduction by multiplying the dividend amount by 10%, 50%, or 100% depending on their ownership in the distributingcorporation's stock.

TrendSetter Inc. paid $50,000 in premiums for life insurance coverage for its key employees for which TrendSetter Inc. is the beneficiary. What is the nature of the book-tax difference created by this expense?

Which of the following statements regarding book-tax differences associated with purchased goodwill is false?

Jazz Corporation owns 50% of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income before the dividend was$100,000. What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Controlled group provisions in the tax law prevent taxpayers from splitting a corporation into several smaller corporations to take advantage of low marginal corporate tax rates at low levels of income.

Taxable income of the most profitable corporations is subject to a flat 35% tax rate.

Which of the following is not an acceptable method of determining the required annual payment of federal income tax for corporations?

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