Exam 5: Corporate Operations

Jazz Corporation owns 10 percent of the Mitchell Corporation stock. Mitchell distributed a $11,000 dividend to Jazz Corporation. Jazz Corporation's taxable income (loss) before the dividendincome was ($2,100). What is the amount of Jazz's dividends received deduction on the dividend it received from Mitchell Corporation?

Corporations are not allowed to deduct charitable contributions in excess of 10percent of the corporation's taxable income (before the charitable contribution and certain other deductions).

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

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

For Corporation P to file a consolidated tax return with Corporation S, P must own what percentage of S's voting stock?

Taxable income ofall C corporations is subject to a flat 21 percent tax rate.

Coop Incorporated owns 40percent of Chicken Incorporated. Both Coop and Chicken are corporations. Chicken pays Coop a dividend of $10,000 in the current year. Chicken also reports financial accounting earnings of $20,000 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)?

Orange Incorporated issued 26,000 nonqualified stock options valued at $52,000 (in total). The options vest over two years-half in 2020 (the year of issue) and half in 2020. One thousand options are exercised in 2021 with a bargain element on each option of $6. What is the 2021 book-tax difference associated with the stock options?

An affiliated group must file a consolidated tax return.

Large corporations (corporations with more than $1,000,000 in taxable income in any of the three years prior to the current year) can use their prior tax year liability to determine all required estimated quarterly payments for the current year.

Jazz Corporation owns 10percent of the Mitchell Corporation stock. Mitchell distributed a $10,000 dividend to Jazz Corporation. Jazz Corporation'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 Mitchell Corporation?

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?

GenerUs Incorporated board of directors approved a charitable cash contribution to FoodBank, a qualified nonprofit organization, in November of 2020. GenerUs made the payment to FoodBank on February 2, 2021. GenerUs Incorporated (a calendar-year corporation) may claim a deduction for the contribution on its 2020 tax return.

Jazz Corporation owns 50 percent of the Mitchell Corporation stock. Mitchell distributed a $17,000 dividend to Jazz Corporation. Jazz Corporations taxable income before the dividend was $100,700. What is the amount of Jazz's dividends received deduction on the dividend it received from Mitchell Corporation?

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

Which of the following statements regarding dividends and/or the dividends received deduction (DRD) is true?

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?

For incentive stock options, the value of the options that vest in a given year always creates a permanent, unfavorable book-tax difference.

Corporations are not allowed to deduct charitable contributions in excess of a percentage of modified taxable income limitation (before the charitable contribution and certain other deductions).

Imperial Construction Incorporated (IC) issued 100,000 incentive stock options (ISOs) to its employees on January 1, 2019, with an estimated value of $5.50 per option. The options vest (accrue) at 25 percent per year for four years (beginning in 2020). Each option allows the holder to purchase one share of stock at $8. On January 1, 2021, employees exercised 12,500 options as IC's stock price reached $14.72. What is the amount of the book-tax difference in 2021 associated with the incentive stock options? Is it favorable or unfavorable? Is it temporary or permanent?