Exam 11: The Corporate Taxpayer

A corporation that owns more than $10 million of total assets uses which schedule to reconcile book income to taxable income?

The corporate alternative minimum tax was designed to insure that corporations with substantial economic income paid their fair share of the federal tax burden.

Which of the following is a means to avoid the double taxation burden imposed on the profits of corporations?

The only alternative to double taxation of corporate earnings is to treat corporations as passthrough entities, similar to partnerships.

When price competition is fierce, the incidence of the corporate income tax

Joanna has a 35% marginal tax rate and owns 100% of the stock of Loman Corporation. This year, Loman generated $400,000 of taxable income, paid $84,000 of corporate income tax, and paid a $50,000 dividend to Joanna. Suppose that the federal income tax system has been amended to allow shareholders to gross up dividend income by the corporate tax paid with respect to the dividend and credit this tax against their individual tax. Further assume that dividends-received by individuals are not eligible for a preferential tax rate. Calculate Joanna's reported dividend income and her tax due on the dividend.

Assuming that the corporation has a 21% MTR, which of the following statements is true?

Franton Co., a calendar year, accrual basis corporation, reported $2,076,000 net income after tax on its current year financial statements prepared in accordance with GAAP. The corporation's financial records reveal the following information. Federal tax expense per books was $660,000. Franton received $22,400 of dividends from its investment in Microsoft and General Motors stock. Bad debt expense was $12,900, and write-offs of uncollectible accounts receivable totaled $16,300. Book depreciation was $110,890, and MACRS depreciation was $94,700. Franton paid a $50,000 fine to the City of Albany for illegal trash dumping. Compute Franton's taxable income and regular tax liability.

Most tax credits for which a corporate taxpayer would be eligible are nonrefundable.

After 2017, a 1.4% excise tax applies to the net investment income of all colleges and universities.

For tax years beginning after December 31, 2015, which of the following statements regarding corporate tax filing requirements is false?

If a corporation has accumulated minimum tax credits from tax years prior to 2018, 100 percent of such credits are refundable on their 2018 tax return.

Corporate taxable income earned before December 31, 2017 is taxed using a rate schedule that includes rates ranging from 15% to 39%.

Frazier, Inc. paid a $150,000 cash dividend to its shareholders. The corporation cannot deduct this payment on its corporate income tax return.

Torquay Inc.'s 2017 taxable income was $9,782,200, and its tax liability was $3,325,948. Torquay's director of tax estimates that the corporation's 2018 taxable income will be $13,350,000. Compute Torquay's 2018 estimated tax payment due on April 15, 2018.

Fleet, Inc. owns 85% of the stock of Pete, Inc. and 35% of the stock of Zete, Inc. and 90% of the stock of Stock ownership of Bete, Inc. Bete owns 5% of the stock of Pete and 5% of the stock of Zete. Zete owns 10% of the stock of Bete. The remaining stock of Pete and Zete is owned by unrelated individuals. Which of the following statements is correct?

This year, Sonoma Corporation received the following dividends: Alpha, Inc. (a taxable Florida corporation in which Sonoma owns a 5% stock interest) $ 30,000 Beta, Inc. (a taxable Mexican corporation in which Sonoma owns a 25% stock interest) 20,000 Gamma, Inc. (a taxable Texas corporation in which Sonoma owns a 50% stock interest) 50,000 Before considering the above dividends, Sonoma has taxable income of $550,000. Calculate Sonoma's allowable dividends-received deduction and taxable income.

Eagle, Inc. made a contribution to the Boy Scouts of $25,000 during its current tax year. The corporation's taxable income before any charitable contribution deduction was $200,000. The corporation has a current charitable contribution deduction of $25,000.

Which of the following statements regarding the current year tax treatment of corporate dividends is true?

Honu, Inc. has book income of $1,200,000. Book income includes $380,000 income tax expense, $10,000 of municipal bond interest income, and $150,000 of business meals expense. Based only on these items, compute Honu's taxable income.