Exam 3: The Corporate Income Tax

Little Corporation uses the accrual method of accounting. Little's sole shareholder, Renee, uses the cash method of accounting. Both taxpayers use the calendar year as their tax year. The corporation accrues a $25,000 interest payment to Renee on December 25 and makes the payment on March 10. What are the tax consequences of the transactions to both taxpayers in preceding year and current year?

Island Corporation has the following income and expense items for the year: The taxable income of Island Corporation is

The following expenses are incurred by Salter Corporation when it is organized on July 1: Salter commenced business on September 8. What is the maximum amount of organizational expenditures that can be deducted by the corporation for its first tax year ending December 31?

Identify which of the following statements is true.

Cricket Corporation has a $50,000 NOL in the current year. Cricket does not have pre 2018 NOLs. Cricket expects its taxable income for next year to exceed $40,000. What issues should be considered with respect to the use of the NOL?

Identify which of the following statements is true.

What impact does an NOL carryforward have on the proper sequencing of deductions to compute corporate taxable income?

Bright Corporation purchased residential real estate five years ago for $450,000, of which $50,000 was allocated to the land and $400,000 was allocated to the building. Bright booked straight-line MACRS deductions of $55,000 during the past five years. This year, Bright sells the property for $550,000, of which $100,000 is allocated to the land and $450,000 is allocated to the building. What is the amount and character of Bright's recognized gain or loss on the sale?

Organizational expenditures include all of the following except for

Miller Corporation has gross income of $100,000, which includes $60,000 of dividends from a 10%-owned corporation. In addition, Miller has $80,000 of expenses. Miller's taxable income or loss is

Richards Corporation has taxable income of $280,000 calculated before the charitable contribution deduction and before its dividends-received deduction of $34,000. Richards makes cash contributions of $35,000 to charitable organizations. What is Richards Corporation's charitable contribution deduction for the current year?

Identify which of the following statements is false.

A new corporation may generally select one of the following accounting methods with the exception of

For corporations, what happens to excess charitable contributions?

Identify which of the following statements is true.

How does the use of an NOL differ for individual and corporate taxpayers?

Lass Corporation reports a $25,000 net capital loss this year. The corporation reports the following net capital gains during the past three years. Determine the amount of net capital loss carried back to each preceding tax year and the amount of capital loss, if any, available as a carryforward.

Bermuda Corporation reports the following results in 2018 and 2019? What is Bermuda's contribution deduction in 2018 and 2019? What is the disposition of any remaining amount?

Identify which of the following statements is true.

Blueboy Inc. contributes inventory to a qualified charity for use in feeding the needy. The inventory has a $70,000 FMV and a $30,000 adjusted basis. Blueboy Inc. can take a charitable contribution deduction of