Question 1

Calendar-year corporations that request an extension for filing their 2018 tax returns will have a tax return due date of October 15.

Accepted Answer

A) True 
 B)False

Question 2

Income that is included in book income, but excluded from taxable income, results in a favorable, permanent book-tax difference.

Accepted Answer

A) True 
 B)False

Question 3

AR Systems Inc. (AR) had $120,000 of tax liability last year. It anticipates a current-year tax liability of $500,000. Assuming AR is considered a large corporation for purposes of estimating tax liability, what are the minimum estimated tax payments it should make to avoid underpayment penalties? Ignore the annualized income method.

Accepted Answer

Q1: $30,000, Q2: $220,000, Q3: $125,000,

Question 4

Studios reported a net capital loss of $30,000 in year 5. It reported net capital gains of $14,000 in year 4 and $27,000 in year 6. What is the amount and nature of the book-tax difference in year 6 related to the net capital carryover?

Accepted Answer

A)  $11,000 unfavorable. 
B)  $11,000 favorable. 
C)  $16,000 unfavorable. 
D)  $16,000 favorable. 
A)  $11,000 unfavorable. 
B)  $11,000 favorable. 
C)  $16,000 unfavorable. 
D)  $16,000 favorable.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements regarding book-tax differences is True?

Accepted Answer

A)  Corporations are not required to report book-tax differences on their income tax returns. 
B)  Corporations will eventually recognize the same amount of income for book and tax purposes for income-related temporary book-tax differences. 
C)  Income excludable for tax purposes usually creates a temporary book-tax difference. 
D)  None of the choices are True. 
A)  Corporations are not required to report book-tax differences on their income tax returns. 
B)  Corporations will eventually recognize the same amount of income for book and tax purposes for income-related temporary book-tax differences. 
C)  Income excludable for tax purposes usually creates a temporary book-tax difference. 
D)  None of the choices are True.

Question 7

For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.

Accepted Answer

A) True 
 B)False

Question 8

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.?

Accepted Answer

A)  $0. 
B)  $2,000. 
C)  $4,000. 
D)  $5,000. 
E)  None of the choices is correct. 
A)  $0. 
B)  $2,000. 
C)  $4,000. 
D)  $5,000. 
E)  None of the choices is correct.

Question 9

The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

NOL and capital loss carryovers are deductible in calculating the charitable contribution limit modified taxable income, while capital loss carrybacks are not.

Accepted Answer

A) True 
 B)False

Question 13

Taxable income of the all C corporations is subject to a flat 21% tax rate.

Accepted Answer

A) True 
 B)False

Question 14

Corporation A receives a dividend from Corporation B. It includes the dividend in gross income for tax purposes but includes a pro-rata portion of B's earnings in its financial accounting income. If A has accounted for the dividend correctly (using the general rule), how much of B's stock does A own?

Accepted Answer

A)  A owns less than 20 percent of the stock of B. 
B)  A owns at least 20 but not more than 50 percent of the stock of B. 
C)  A owns more than 50 percent of the stock of B. 
D)  Cannot be determined. 
A)  A owns less than 20 percent of the stock of B. 
B)  A owns at least 20 but not more than 50 percent of the stock of B. 
C)  A owns more than 50 percent of the stock of B. 
D)  Cannot be determined.

Question 15

Federal income tax expense reported on a corporation's books generates a temporary book-tax difference for Schedule M-3 purposes.

Accepted Answer

A) True 
 B)False

Question 16

Rapidpro Inc. had more than $1,000,000 of taxable income two years prior to the current year. It would like to use its prior year tax liability (which was very low but above zero) to determine its quarterly estimated payments this year. Which of the following statements is True?

Accepted Answer

A)  Rapidpro may use the prior year tax liability to determine its first and second quarter estimated tax payments only since it is a large corporation. 
B)  To avoid penalty, the second quarter estimated payment must be large enough to cover 50 percent of its estimated annual tax liability annualized from its first quarter estimated taxable income (assume it does not rely on its current year actual tax liability to determine its estimated tax payment). 
C)  To avoid penalty, the third quarter estimated payment must be large enough to cover 50 percent of its estimated annual tax liability annualized from its third quarter estimated taxable income (assume it does not rely on its current year actual tax liability to determine its estimated tax payment). 
D)  None of the choices are True. 
A)  Rapidpro may use the prior year tax liability to determine its first and second quarter estimated tax payments only since it is a large corporation. 
B)  To avoid penalty, the second quarter estimated payment must be large enough to cover 50 percent of its estimated annual tax liability annualized from its first quarter estimated taxable income (assume it does not rely on its current year actual tax liability to determine its estimated tax payment). 
C)  To avoid penalty, the third quarter estimated payment must be large enough to cover 50 percent of its estimated annual tax liability annualized from its third quarter estimated taxable income (assume it does not rely on its current year actual tax liability to determine its estimated tax payment). 
D)  None of the choices are True.

Question 17

Remsco has taxable income of $60,000 and a charitable contribution limit modified taxable income of $72,000. Its charitable contributions for the year were $7,500. What is Remsco's current-year charitable contribution deduction and contribution carryover?

Accepted Answer

A)  $6,000 current-year deduction; $1,500 carryover. 
B)  $7,500 current-year deduction; $0 carryover. 
C)  $1,200 current-year deduction; $6,300 carryover. 
D)  $7,200 current-year deduction; $300 carryover. 
A)  $6,000 current-year deduction; $1,500 carryover. 
B)  $7,500 current-year deduction; $0 carryover. 
C)  $1,200 current-year deduction; $6,300 carryover. 
D)  $7,200 current-year deduction; $300 carryover.

Question 18

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

Accepted Answer

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

Question 19

Which of the following describes the correct treatment of the exercise of nonqualified stock options (NQOs)?

Accepted Answer

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

Question 20

A C corporation reports its taxable income or loss on Form 1065.

Accepted Answer

A) True 
 B)False

Calendar-year corporations that request an extension for filing their 2018 tax returns will have a tax return due date of October 15.

Income that is included in book income, but excluded from taxable income, results in a favorable, permanent book-tax difference.

Studios reported a net capital loss of $30,000 in year 5. It reported net capital gains of $14,000 in year 4 and $27,000 in year 6. What is the amount and nature of the book-tax difference in year 6 related to the net capital carryover?

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

Which of the following statements regarding book-tax differences is True?

For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.

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.?

The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

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

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

NOL and capital loss carryovers are deductible in calculating the charitable contribution limit modified taxable income, while capital loss carrybacks are not.

Taxable income of the all C corporations is subject to a flat 21% tax rate.

Federal income tax expense reported on a corporation's books generates a temporary book-tax difference for Schedule M-3 purposes.

Rapidpro Inc. had more than $1,000,000 of taxable income two years prior to the current year. It would like to use its prior year tax liability (which was very low but above zero) to determine its quarterly estimated payments this year. Which of the following statements is True?

Remsco has taxable income of $60,000 and a charitable contribution limit modified taxable income of $72,000. Its charitable contributions for the year were $7,500. What is Remsco's current-year charitable contribution deduction and contribution carryover?

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

Which of the following describes the correct treatment of the exercise of nonqualified stock options (NQOs)?

A C corporation reports its taxable income or loss on Form 1065.

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

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 U.S. Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 5: Corporate Operations

Calendar-year corporations that request an extension for filing their 2018 tax returns will have a tax return due date of October 15.

Income that is included in book income, but excluded from taxable income, results in a favorable, permanent book-tax difference.

Studios reported a net capital loss of $30,000 in year 5. It reported net capital gains of $14,000 in year 4 and $27,000 in year 6. What is the amount and nature of the book-tax difference in year 6 related to the net capital carryover?

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

Which of the following statements regarding book-tax differences is True?

For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.

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.?

The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

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

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

NOL and capital loss carryovers are deductible in calculating the charitable contribution limit modified taxable income, while capital loss carrybacks are not.

Taxable income of the all C corporations is subject to a flat 21% tax rate.

Federal income tax expense reported on a corporation's books generates a temporary book-tax difference for Schedule M-3 purposes.

Rapidpro Inc. had more than $1,000,000 of taxable income two years prior to the current year. It would like to use its prior year tax liability (which was very low but above zero) to determine its quarterly estimated payments this year. Which of the following statements is True?

Remsco has taxable income of $60,000 and a charitable contribution limit modified taxable income of $72,000. Its charitable contributions for the year were $7,500. What is Remsco's current-year charitable contribution deduction and contribution carryover?

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

Which of the following describes the correct treatment of the exercise of nonqualified stock options (NQOs)?

A C corporation reports its taxable income or loss on Form 1065.

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

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 U.S. Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters