Exam 11: The Corporate Taxpayer

Joanna has a 35% marginal tax rate and owns 100% of the stock of Loman Corporation. This year, Loman generated $400,000 of taxable income, paid $84,000 of corporate income tax, and paid a $50,000 dividend to Joanna. Suppose that the federal income tax system has been amended to allow shareholders to gross up dividend income by the corporate tax paid with respect to the dividend and credit this tax against their individual tax. Further assume that dividends-received by individuals are not eligible for a preferential tax rate. Calculate Joanna's reported dividend income and her tax due on the dividend.

The minimum tax credit is an example of a nonrefundable credit.

Corporate taxable income earned before December 31, 2017 is taxed using a rate schedule that includes rates ranging from 15% to 39%.

Generally, the corporate income tax is computed using a regressive rate schedule.

Walker Inc. has accumulated minimum tax credits of $740,000 from tax years prior to 2018. Below are Walker's regular tax before credits for 2018 through 2021. 2018 2019 2020 2021 Regular tax before credita \5 0,000 \6 0,000 \4 0,000 \3 0,000 Complete the following table to calculate Walker's allowable minimum tax credit each year. 2018 2019 2020 2021 Nonrefundable portion of minimum tax credit Refundable portion of minimum tax credit Total minimum tax aredit used

Eagle, Inc. made a contribution to the Boy Scouts of $25,000 during its current tax year. The corporation's taxable income before any charitable contribution deduction was $200,000. The corporation has a current charitable contribution deduction of $25,000.

Under normal circumstances, a corporate taxpayer would prefer a $50,000 deduction to a $50,000 credit.

Walker Inc. has accumulated minimum tax credits of $740,000 from tax years prior to 2018. Below are Walker's regular tax before credits for 2018 through 2021.Complete the following table to calculate Walker's allowable minimum tax credit each year, assuming it does NOT make the quickie refund election provided by the CARES Act. 2018 2019 Regular tax before credits \ 50,000 \ 60,000 Nonrefundable portion of minimum tax credit Refundable portion of minimum tax credit Total minimum tar aredit used

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. Assume neither year is 2020.

When price competition is fierce, companies easily shift the burden of a tax increase to their customers via higher prices.

Corporate taxable income after December 31, 2017 is taxed using a progressive rate schedule with a top marginal rate of 21%.

Corporations are allowed a deduction for charitable contributions, limited to 10 percent of taxable income before the deduction.

Aaron, Inc. is a nonprofit corporation that collects and distributes food for needy families. Aaron, Inc. also operates a small grocery store for profit. Which of the following statements is true?

Torquay Inc.'s (a calendar-year taxpayer) 2019 taxable income was $15,837,850, and its tax liability was $3,325,948. Torquay's director of tax estimates that the corporation's 2020 taxable income will be $13,350,000. Compute Torquay's 2020 estimated tax payment originally due on April 15, 2020, but extended until July 15, 2020.

Cranston Corporation has accumulated minimum tax credits of $924,000 from tax years prior to 2018. If 2018 regular tax before credits is $152,000, and it does not make the quickie refund election provided by the CARES Act, Cranston's allowable minimum tax credit for 2018 is:

The stock of closely held corporations is typically restricted as to transferability by some type of buy-sell agreement and cannot be sold on the open market.

For a consolidated group of corporations, Schedule M-3 Part 1 reconciles worldwide financial statement net income to the financial statement net income of those corporations permitted to be included in the U.S. consolidated tax return group.

A nondeductible charitable contribution is a permanent book/tax difference.

For a corporate taxpayer in the 21% marginal tax bracket, a $20,000 tax credit is equivalent to a $95,238 tax deduction.

An affiliated group consists of a parent company that directly owns 80% of at least one subsidiary corporation plus all other subsidiaries that are 80% owned within the group.