Exam 11: The Corporate Taxpayer

The four primary legal characteristics of a corporation are unlimited liability, limited life, free transferability of interests, and centralized management.

In its first taxable year, Platform, Inc. generated a $100,000 net operating loss and made a $10,000 cash donation to a local charity. In its second year, Platform generated $350,000 operating income and made a $20,000 donation to the same charity. Compute Platform's taxable income for its second year.

Eagle, Inc. made a contribution to the Boy Scouts of $65,000 during 2020. The corporation's taxable income before any charitable contribution deduction was $200,000. The corporation has a current charitable contribution deduction of $65,000.

After 2017, a 1.4% excise tax applies to the net investment income of all colleges and universities.

Hearth, Inc. reported $30,000 of depreciation expense on its financial statements. For federal income tax purposes, it deducted depreciation of $35,000. This book/tax difference would result in an increase to net income per books on the Schedule M-1 or M-3.

Which of the following statements regarding the rehabilitation credit is false?

Liston, Inc. had taxable income of $1 million for calendar year 2020. Compute Liston's regular tax liability.

New York, Inc. owns 100% of Brooklyn, Inc. and Queens, Inc. Taxable income for the three corporations for their first year was as follows: New York \6 28,000 Brooklyn 246,000 Queens (105,000) Which of the following statements is false?

A corporation with a June 30 fiscal year earns $1 million for its tax year ended June 30, 2018. Regular tax liability on this income is $210,000.

Most tax credits for which a corporate taxpayer would be eligible are nonrefundable.

Sonic Corporation has a 21% marginal tax rate and received $10,000 of dividends from Roller, Inc., a U.S. corporation in which Sonic owns less than 2% of the outstanding stock. Sonic's effective tax rate on the Roller dividend is:

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.

Which of the following is a means to avoid the double taxation burden imposed on the profits of corporations?

For 2020, corporations are allowed a deduction for charitable contributions, limited to 25 percent of taxable income before the deduction.

Donatoni Corporation owns 40% of Market, Inc. voting common stock. During the current year, Donatoni received a $30,000 dividend from Market. Donatoni must report the dividend as gross income, and is allowed a $15,000 dividends-received deduction.

After 2017, a 37% excise tax applies to compensation in excess of $1 million paid to executives of tax-exempt organizations.

The only alternative to double taxation of corporate earnings is to treat corporations as passthrough entities, similar to partnerships.

A corporation is required to report differences between book and taxable income on either Schedule M-1 or Schedule M-3 of the corporate income tax return.

A corporation that owns more than $10 million of total assets uses which schedule to reconcile book income to taxable income?

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