Question 1

Identify which of the following statements is true.

Accepted Answer

A) Payment of deficiency dividends will prevent the imposition of the accumulated earnings tax. 
B) All corporations are exempt from the accumulated earnings tax on their first $250,000 of accumulated earnings. 
C) A health service corporation can claim an accumulated earnings credit of $250,000. 
D) All of the above are false. 
A) Payment of deficiency dividends will prevent the imposition of the accumulated earnings tax. 
B) All corporations are exempt from the accumulated earnings tax on their first $250,000 of accumulated earnings. 
C) A health service corporation can claim an accumulated earnings credit of $250,000. 
D) All of the above are false.

Question 2

The personal holding company tax might be imposed

Accepted Answer

A) on both partnerships and corporations. 
B) on companies whose gross income arises solely from rentals, if the lessors render no services to the lessees. 
C) if more than 50% of the company is owned by five or fewer individuals for the entire year. 
D) on small business investment companies licensed by the Small Business Administration. 
A) on both partnerships and corporations. 
B) on companies whose gross income arises solely from rentals, if the lessors render no services to the lessees. 
C) if more than 50% of the company is owned by five or fewer individuals for the entire year. 
D) on small business investment companies licensed by the Small Business Administration.

Question 3

Which of the following actions cannot be used to eliminate a possible personal holding company tax liability involving a corporation owned by a mother and a father?

Accepted Answer

A) Sell additional stock to other family members. 
B) Make a cash distribution within 2 1/2 months of the end of the tax year. 
C) Make a deficiency distribution within 90 days of the date on which the IRS determines that a personal holding company liability is owed. 
D) Liquidate the corporation. 
A) Sell additional stock to other family members. 
B) Make a cash distribution within 2 1/2 months of the end of the tax year. 
C) Make a deficiency distribution within 90 days of the date on which the IRS determines that a personal holding company liability is owed. 
D) Liquidate the corporation.

Question 4

Green Corporation, a closely held operating corporation, reports the following:   Calculate Green's accumulated taxable income.

Accepted Answer

@#IMG-DLM& *$30,000 * .21% = $

Question 5

A low tax bracket individual can enhance the avoidance of income taxes through a C corporation by having the corporation retain its after tax earnings rather than paying them out as a dividend.

Accepted Answer

A) True 
 B)False

Question 6

Identify which of the following statements is true.

Accepted Answer

A) Consent dividends are cash dividends paid following an authorizing vote of the shareholders. 
B) Dividends that are paid in the two preceding tax years can be used as a dividend carryover to reduce the amount of the current year's personal holding company (PH
C) tax liability. 
C) Dividends paid by a personal holding company in the first 2 1/2 months of a tax year are automatically throwback dividends. 
D) All of the above are false. 
A) Consent dividends are cash dividends paid following an authorizing vote of the shareholders. 
B) Dividends that are paid in the two preceding tax years can be used as a dividend carryover to reduce the amount of the current year's personal holding company (PH
C) tax liability. 
C) Dividends paid by a personal holding company in the first 2 1/2 months of a tax year are automatically throwback dividends. 
D) All of the above are false.

Question 7

A corporation can exclude certain categories of income (e.g., adjusted income from rents)from PHCI
through the payment of dividends sufficient to reduce the amount of other PHCI to 10% or less of OGI.

Accepted Answer

A) True 
 B)False

Question 8

A high tax bracket individual can enhance the avoidance of income taxes through a C corporation by having the corporation retain its after tax earnings so that when the individual dies, his or her heirs can liquidate the corporation and realize little to no gain because of a step-up in basis.

Accepted Answer

A) True 
 B)False

Question 9

Wind Corporation is a personal holding company. Its taxable income for this year is $100,000. The corporation's charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation. Wind's UPHCI is $95,000, assuming no other adjustments must be made.

Accepted Answer

A) True 
 B)False

Question 10

Lake Corporation is a personal holding company. Lake reports the following results for the current year:   No dividends are paid during the current year or the 2-and-one-half-month throwback period. The mortgage relates to the rental properties. Calculate the adjusted income from rents exclusion from personal holding company income.

Accepted Answer

@#IMG-DLM& The rents cannot be excluded

Question 11

Which of the following entities is subject to the accumulated earnings tax?

Accepted Answer

A) Sec. 501 tax-exempt corporation 
B) personal holding company 
C) C corporation 
D) S corporation 
A) Sec. 501 tax-exempt corporation 
B) personal holding company 
C) C corporation 
D) S corporation

Question 12

Investors Corporation has ten unrelated individual shareholders who each own 10% of the outstanding stock. For their tax year ended December 31 of this year, Investors' gross income includes:   No dividends are paid during the tax year or during the 2-1/2 month throwback period. Deductible administrative expenses total $4,000 for the year. Rental income has been reduced by $1,000 of depreciation and $2,000 of interest expense. What is Investors' undistributed personal holding company income?

Accepted Answer

Investors is not a personal ho

Question 13

In determining accumulated taxable income for the purpose of the accumulated earnings tax, which one of the following is allowed as a deduction?

Accepted Answer

A) excess charitable contributions 
B) dividends-received deduction 
C) net operating loss deduction 
D) net capital loss for the current year 
A) excess charitable contributions 
B) dividends-received deduction 
C) net operating loss deduction 
D) net capital loss for the current year

Question 14

Mullins Corporation is classified as a PHC for the current year, reporting $263,000 of taxable income on its federal income tax return:   Actual charitable contributions made by Mullins Corporation were $75,000. What are the federal income tax due and the personal holding company (PHC)tax liability? Discuss the methods (if any)by which payment of the PHC tax can be avoided.

Accepted Answer

@#IMG-DLM& a$20,000 - ($20,000 × 0.21)=

Question 15

Which of the following is not permitted an accumulated earnings credit based on reasonable needs of the business?

Accepted Answer

A) an operating company 
B) an investment company 
C) an incorporated engineer 
D) All of the above are permitted a credit based on reasonable business needs. 
A) an operating company 
B) an investment company 
C) an incorporated engineer 
D) All of the above are permitted a credit based on reasonable business needs.

Question 16

Smartmoney, Inc. was formed by three wealthy dentists to pool their investment funds. They each invested $200,000 in the corporation, which was immediately used to purchase stocks to be held as investments. The first year, the corporation received dividends of $70,000 and filed a tax return paying a corporation tax in the amount of $7,350 [($70,000 dividends - $35,000 DRD)× .21 = $7,350]. The IRS audits this corporation and sends a tax bill in the amount of $12,530 ($62,650 UPHCI × 0.20 = $12,530)plus underpayment penalty and interest. What is this additional tax and what should the dentists do about it? What action(s)do you recommend the corporation take for the tax year in question and subsequent tax years?

Accepted Answer

This additional tax that was imposed is

Question 17

Dragon Corporation reports a distribution on its return from the third previous year as a stock redemption producing a capital gain. When the return is audited during the current year, the distribution of the third previous year is characterized by the IRS as a dividend. This change causes Dragon Corporation to be classified as a personal holding company for the third previous year. Which of the following statements is correct?

Accepted Answer

A) Dragon Corporation will owe interest and/or underpayment penalty even if the PHC tax is avoided by a deficiency dividend. 
B) Dragon Corporation will owe no interest and/or underpayment penalty if the PHC tax is avoided by a deficiency dividend. 
C) A deficiency dividend is not permitted to be paid by Dragon. 
D) A dividend must be paid within 120 days of establishing the PHC tax liability and a claim for a dividends-paid deduction must be filed within 90 days of the determination date. 
A) Dragon Corporation will owe interest and/or underpayment penalty even if the PHC tax is avoided by a deficiency dividend. 
B) Dragon Corporation will owe no interest and/or underpayment penalty if the PHC tax is avoided by a deficiency dividend. 
C) A deficiency dividend is not permitted to be paid by Dragon. 
D) A dividend must be paid within 120 days of establishing the PHC tax liability and a claim for a dividends-paid deduction must be filed within 90 days of the determination date.

Question 18

A corporation cannot reasonably accumulate earnings to

Accepted Answer

A) protect against pending litigation. 
B) fund an employee retirement plan. 
C) self-insure. 
D) redeem stock of an elderly shareholder where such accumulation occurs prior to the shareholder's death. 
A) protect against pending litigation. 
B) fund an employee retirement plan. 
C) self-insure. 
D) redeem stock of an elderly shareholder where such accumulation occurs prior to the shareholder's death.

Question 19

A corporation can be subject to both the accumulated earnings tax and the personal holding company tax in the same year.

Accepted Answer

A) True 
 B)False

Question 20

Define personal holding company income.

Accepted Answer

Personal holding company income includes

Identify which of the following statements is true.

The personal holding company tax might be imposed

Which of the following actions cannot be used to eliminate a possible personal holding company tax liability involving a corporation owned by a mother and a father?

Green Corporation, a closely held operating corporation, reports the following: Calculate Green's accumulated taxable income.

A low tax bracket individual can enhance the avoidance of income taxes through a C corporation by having the corporation retain its after tax earnings rather than paying them out as a dividend.

Identify which of the following statements is true.

A corporation can exclude certain categories of income (e.g., adjusted income from rents)from PHCI through the payment of dividends sufficient to reduce the amount of other PHCI to 10% or less of OGI.

A high tax bracket individual can enhance the avoidance of income taxes through a C corporation by having the corporation retain its after tax earnings so that when the individual dies, his or her heirs can liquidate the corporation and realize little to no gain because of a step-up in basis.

Wind Corporation is a personal holding company. Its taxable income for this year is $100,000. The corporation's charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation. Wind's UPHCI is $95,000, assuming no other adjustments must be made.

Which of the following entities is subject to the accumulated earnings tax?

In determining accumulated taxable income for the purpose of the accumulated earnings tax, which one of the following is allowed as a deduction?

Which of the following is not permitted an accumulated earnings credit based on reasonable needs of the business?

A corporation cannot reasonably accumulate earnings to

A corporation can be subject to both the accumulated earnings tax and the personal holding company tax in the same year.

Define personal holding company income.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters

Exam 5: Other Corporate Tax Levies

Identify which of the following statements is true.

The personal holding company tax might be imposed

Which of the following actions cannot be used to eliminate a possible personal holding company tax liability involving a corporation owned by a mother and a father?

Green Corporation, a closely held operating corporation, reports the following: Calculate Green's accumulated taxable income.

A low tax bracket individual can enhance the avoidance of income taxes through a C corporation by having the corporation retain its after tax earnings rather than paying them out as a dividend.

Identify which of the following statements is true.

A corporation can exclude certain categories of income (e.g., adjusted income from rents)from PHCI through the payment of dividends sufficient to reduce the amount of other PHCI to 10% or less of OGI.

A high tax bracket individual can enhance the avoidance of income taxes through a C corporation by having the corporation retain its after tax earnings so that when the individual dies, his or her heirs can liquidate the corporation and realize little to no gain because of a step-up in basis.

Wind Corporation is a personal holding company. Its taxable income for this year is $100,000. The corporation's charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation. Wind's UPHCI is $95,000, assuming no other adjustments must be made.

Which of the following entities is subject to the accumulated earnings tax?

In determining accumulated taxable income for the purpose of the accumulated earnings tax, which one of the following is allowed as a deduction?

Which of the following is not permitted an accumulated earnings credit based on reasonable needs of the business?

A corporation cannot reasonably accumulate earnings to

A corporation can be subject to both the accumulated earnings tax and the personal holding company tax in the same year.

Define personal holding company income.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters