Question 1

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 current year's tax liability. 
C) 100 percent of the estimated current-year tax liability using the annualized income method. 
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 current year's tax liability. 
C) 100 percent of the estimated current-year tax liability using the annualized income method. 
D) All of the choices are acceptable methods of determining the required annual payment of federal income tax for corporations.

Question 2

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

Accepted Answer

A) In general, smaller corporations are required to complete Schedule M-1 while larger corporations are required to complete Schedule M-3. 
B) Schedule M-3 lists more book-tax differences than Schedule M-1. 
C) Both Schedules M-1 and M-3 reconcile to a corporation's bottom line taxable income. 
D) Schedule M-1 does not distinguish between temporary and permanent book-tax differences whereas Schedule M-3 does. 
A) In general, smaller corporations are required to complete Schedule M-1 while larger corporations are required to complete Schedule M-3. 
B) Schedule M-3 lists more book-tax differences than Schedule M-1. 
C) Both Schedules M-1 and M-3 reconcile to a corporation's bottom line taxable income. 
D) Schedule M-1 does not distinguish between temporary and permanent book-tax differences whereas Schedule M-3 does.

Question 3

In January 2019, Khors Company issued nonqualified stock options to its CEO, Jenny Svaro. Because the company did not expect Miss Svaro to leave the company, the options vested at the time they were granted with a total value of $50,000. In December of 2020, the company experienced a surge in its stock price, and Miss Svaro exercised the options. The total bargain element at the time of exercise was $60,000. For 2020, what is the book-tax difference due to the options exercised?

Accepted Answer

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

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

If a corporation's cash charitable contributions exceed the charitable contribution deduction limit, what kind of book-tax difference is created?

Accepted Answer

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

Question 6

LuxAir Incorporated (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 percent. JRC has $270,000 in earnings 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 the year?

Accepted Answer

$18,942, c

Question 7

Coop Incorporated owns 36 percent of Chicken Incorporated. Both Coop and Chicken are corporations. Chicken pays Coop a dividend of $20,000 in the current year. Chicken also reports financial accounting earnings of $30,000 for that year. Assume 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 dividends received deduction)?

Accepted Answer

A) $9,200 unfavorable. 
B) $9,200 favorable. 
C) $20,000 unfavorable. 
D) $20,000 favorable. 
E) None of the choices is correct. 
A) $9,200 unfavorable. 
B) $9,200 favorable. 
C) $20,000 unfavorable. 
D) $20,000 favorable. 
E) None of the choices is correct.

Question 8

Which of the following statements regarding net operating losses generated in 2020 is true?

Accepted Answer

A) Corporations can carrythe NOL back two years and forward up to 20 years. 
B) A corporation can carry over the NOL indefinitely. 
C) A corporation can carrythe NOL back two years and forward indefinitely. 
D) When a corporation applies a net operating loss carryover, it reports a favorable, permanent book-tax difference in the amount of the applied carryover. 
E) None of these is a true statement. 
A) Corporations can carrythe NOL back two years and forward up to 20 years. 
B) A corporation can carry over the NOL indefinitely. 
C) A corporation can carrythe NOL back two years and forward indefinitely. 
D) When a corporation applies a net operating loss carryover, it reports a favorable, permanent book-tax difference in the amount of the applied carryover. 
E) None of these is a true statement.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

WFO Corporation has gross receipts according to the following schedule:   If WFO began business as a cash-method corporation in Year 1, in which year would it have first been required to use the accrual method?

Accepted Answer

A) Year 3. 
B) Year 4. 
C) Year 5. 
D) Year 6. 
E) None of the choices are correct. 
A) Year 3. 
B) Year 4. 
C) Year 5. 
D) Year 6. 
E) None of the choices are correct.

Question 11

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 12

For corporations, which of the following regarding net capital losses is true?

Accepted Answer

A) A corporation that experiences a net capital loss has a favorable book-tax difference in the year of the loss. 
B) A corporation that experiences a net capital loss in Year 4 first carries the loss back to Year 3, then Year 2, and then Year 1 before carrying it forward. 
C) Net capital loss carrybacks are deductible in determining a corporation's net operating loss. 
D) Net capital loss carrybacks and carryovers create temporary book-tax differences if they are used before they expire. 
A) A corporation that experiences a net capital loss has a favorable book-tax difference in the year of the loss. 
B) A corporation that experiences a net capital loss in Year 4 first carries the loss back to Year 3, then Year 2, and then Year 1 before carrying it forward. 
C) Net capital loss carrybacks are deductible in determining a corporation's net operating loss. 
D) Net capital loss carrybacks and carryovers create temporary book-tax differences if they are used before they expire.

Question 13

In 2020 Webtel Corporation donated $58,500 to a qualifying charity. For the year, it reported taxable income of $395,000, which included the following: the $58,500 charitable contribution (before limitation), a $117,000 dividends received deduction, and a $21,700 net operating loss carryover. What is Webtel Corporations charitable contribution deductionassuming it does not elect to apply the 25% of modified taxable income limitation in determining its charitable contribution deduction?

Accepted Answer

${{[a(7)]:

Question 14

Which of the following does NOT create a temporary book-tax difference?

Accepted Answer

A) Deferred compensation. 
B) Bad-debt expense. 
C) Depreciation expense. 
D) Dividends received deduction. 
A) Deferred compensation. 
B) Bad-debt expense. 
C) Depreciation expense. 
D) Dividends received deduction.

Question 15

Net capital loss carryovers are deductible againstnet capital gains in determining a corporation's net operating loss for the year.

Accepted Answer

A) True 
 B)False

Question 16

In 2020, US Sys Corporation received $250,000 in death benefits after its CEO (a key employee)died (it included this amount in book income). For book purposes, US Sys also expensed life insurance premiums for other key employees in the amount of $20,000. In addition, for book purposes, it expensed $10,000 ofbusiness meals expenditures. What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the book-tax difference is temporary and what amount is permanent?

Accepted Answer

$225,000 favorable;

Question 17

AB Incorporated received a dividend from CD Corporation and is able to claim a dividends received deduction without limitation. AB owns 10 percent of CD. What is AB's marginal tax rate (to the nearest tenth of a percent)on the dividend received (after taking the DRD into account)?

Accepted Answer

10.5% [21%

Question 18

In 2020 Webtel Corporation donated $55,500 to a qualifying charity. For the year, it reported taxable income of $365,000, which included the following: the $55,500 charitable contribution (before limitation), a $111,000 dividends received deduction, and a $21,100 net operating loss carryover. What is Webtel Corporations charitable contribution deduction?

Accepted Answer

${{[a(7)]:

Question 19

Corporations may carry a net operating loss sustained in 2020 forward 20 years but it cannot carry it back.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

Accepted Answer

A) Net capital loss carrybacks. 
B) Dividends received deduction. 
C) NOL carryovers. 
D) Charitable contributions. 
A) Net capital loss carrybacks. 
B) Dividends received deduction. 
C) NOL carryovers. 
D) Charitable contributions.

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

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

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

If a corporation's cash charitable contributions exceed the charitable contribution deduction limit, what kind of book-tax difference is created?

Which of the following statements regarding net operating losses generated in 2020 is true?

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

WFO Corporation has gross receipts according to the following schedule: If WFO began business as a cash-method corporation in Year 1, in which year would it have first been required to use the accrual method?

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

For corporations, which of the following regarding net capital losses is true?

Which of the following does NOT create a temporary book-tax difference?

Net capital loss carryovers are deductible againstnet capital gains in determining a corporation's net operating loss for the year.

AB Incorporated received a dividend from CD Corporation and is able to claim a dividends received deduction without limitation. AB owns 10 percent of CD. What is AB's marginal tax rate (to the nearest tenth of a percent)on the dividend received (after taking the DRD into account)?

Corporations may carry a net operating loss sustained in 2020 forward 20 years but it cannot carry it back.

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, 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

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

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

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

If a corporation's cash charitable contributions exceed the charitable contribution deduction limit, what kind of book-tax difference is created?

Which of the following statements regarding net operating losses generated in 2020 is true?

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

WFO Corporation has gross receipts according to the following schedule: If WFO began business as a cash-method corporation in Year 1, in which year would it have first been required to use the accrual method?

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

For corporations, which of the following regarding net capital losses is true?

Which of the following does NOT create a temporary book-tax difference?

Net capital loss carryovers are deductible againstnet capital gains in determining a corporation's net operating loss for the year.

AB Incorporated received a dividend from CD Corporation and is able to claim a dividends received deduction without limitation. AB owns 10 percent of CD. What is AB's marginal tax rate (to the nearest tenth of a percent)on the dividend received (after taking the DRD into account)?

Corporations may carry a net operating loss sustained in 2020 forward 20 years but it cannot carry it back.

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, 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