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

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

Accepted Answer

A) True 
 B)False

Question 3

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 4

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 5

Which of the following statements is false regarding corporate estimated tax payments?

Accepted Answer

A)  The due dates for estimated tax payments are the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. 
B)  Corporations must pay estimated taxes only if they have a federal income tax liability greater than $10,000. 
C)  Even though a corporation extends its tax return, it still must pay its tax liability for the year by three and one-half months after year-end. 
D)  Corporations using the annualized income method for determining estimated tax payments project their tax liability for the year based on income from the first, second, and third quarters. 
A)  The due dates for estimated tax payments are the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. 
B)  Corporations must pay estimated taxes only if they have a federal income tax liability greater than $10,000. 
C)  Even though a corporation extends its tax return, it still must pay its tax liability for the year by three and one-half months after year-end. 
D)  Corporations using the annualized income method for determining estimated tax payments project their tax liability for the year based on income from the first, second, and third quarters.

Question 6

AR Systems Incorporated (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

Quarter 1: $30,000, Quarter 2: $220,000,

Question 7

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 8

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 9

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 10

Studios reported a net capital loss of $39,000 in Year 5. It reported net capital gains of $32,000 in Year 4 and $45,000 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)  $38,000 unfavorable. 
B)  $38,000 favorable. 
C)  $7,000 unfavorable. 
D)  $7,000 favorable. 
A)  $38,000 unfavorable. 
B)  $38,000 favorable. 
C)  $7,000 unfavorable. 
D)  $7,000 favorable.

Question 11

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

Accepted Answer

A)  Organizational and start-up expenses. 
B)  Key employee death benefit income. 
C)  Fines and penalties expenses. 
D)  Municipal bond interest income. 
A)  Organizational and start-up expenses. 
B)  Key employee death benefit income. 
C)  Fines and penalties expenses. 
D)  Municipal bond interest income.

Question 12

C corporations with annual average gross receipts of $26 million or more are allowed to use the cash method of accounting for at least the first two years of their existence.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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 15

Which of the following is not required to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity for a calendar year-end corporation?

Accepted Answer

A)  Approval of the payment from the board of directors. 
B)  Approval from the IRS prior to making the contribution. 
C)  Payment made within three and one-half months of the tax year-end. 
D)  All of the choices are necessary. 
A)  Approval of the payment from the board of directors. 
B)  Approval from the IRS prior to making the contribution. 
C)  Payment made within three and one-half months of the tax year-end. 
D)  All of the choices are necessary.

Question 16

The rules for consolidated reporting for financial statement purposes are the same as the rules for consolidated reporting for tax purposes.

Accepted Answer

A) True 
 B)False

Question 17

A corporation may carry a net capital loss back three years and forward five years.

Accepted Answer

A) True 
 B)False

Question 18

iScope Incorporated paid $3,000 in interest on a loan it used to purchase municipal bonds. What is the nature of the book-tax difference relating to this expense?

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 19

Which of the following is allowable as a deduction in calculating a corporation's net operating loss?

Accepted Answer

A)  Charitable contribution deduction. 
B)  Net capital loss carryback. 
C)  Net operating loss carryover from other years. 
D)  Both charitable contribution deduction and net operating loss carryover from other years are deductible in computing the current-year NOL. 
A)  Charitable contribution deduction. 
B)  Net capital loss carryback. 
C)  Net operating loss carryover from other years. 
D)  Both charitable contribution deduction and net operating loss carryover from other years are deductible in computing the current-year NOL.

Question 20

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

Accepted Answer

A) True 
 B)False

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

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

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

Which of the following statements is false regarding corporate estimated tax payments?

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?

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?

Studios reported a net capital loss of $39,000 in Year 5. It reported net capital gains of $32,000 in Year 4 and $45,000 in Year 6. What is the amount and nature of the book-tax difference in Year 6 related to the net capital carryover?

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

C corporations with annual average gross receipts of $26 million or more are allowed to use the cash method of accounting for at least the first two years of their existence.

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

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

Which of the following is not required to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity for a calendar year-end corporation?

The rules for consolidated reporting for financial statement purposes are the same as the rules for consolidated reporting for tax purposes.

A corporation may carry a net capital loss back three years and forward five years.

iScope Incorporated paid $3,000 in interest on a loan it used to purchase municipal bonds. What is the nature of the book-tax difference relating to this expense?

Which of the following is allowable as a deduction in calculating a corporation's net operating loss?

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

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Business Entities Overview

Accounting for Income Taxes

Corporate Taxation: Non-Liquidating 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 5: Corporate Operations

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

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

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

Which of the following statements is false regarding corporate estimated tax payments?

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?

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?

Studios reported a net capital loss of $39,000 in Year 5. It reported net capital gains of $32,000 in Year 4 and $45,000 in Year 6. What is the amount and nature of the book-tax difference in Year 6 related to the net capital carryover?

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

C corporations with annual average gross receipts of $26 million or more are allowed to use the cash method of accounting for at least the first two years of their existence.

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

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

Which of the following is not required to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity for a calendar year-end corporation?

The rules for consolidated reporting for financial statement purposes are the same as the rules for consolidated reporting for tax purposes.

A corporation may carry a net capital loss back three years and forward five years.

iScope Incorporated paid $3,000 in interest on a loan it used to purchase municipal bonds. What is the nature of the book-tax difference relating to this expense?

Which of the following is allowable as a deduction in calculating a corporation's net operating loss?

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

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Business Entities Overview

Accounting for Income Taxes

Corporate Taxation: Non-Liquidating 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