Exam 11: The Corporate Taxpayer

Grumond was incorporated on January 1,2010,and adopted a calendar year for tax purposes.It had the following gross receipts for its first six taxable years: For which of these years is Grumond exempt from AMT?

TasteCo,Inc.reported $210,500 of taxable income this year.What is its regular tax liability?

The purpose of Schedule M-1 is to explain the differences between financial statement income and taxable income.

Palm Corporation has book income of $424,000.Book income reflects $200,000 income tax expense and $55,000 depreciation expense.Tax depreciation expense computed under MACRS is $65,000.Palm received $25,000 of prepaid rent not included in book income.Based only on these items,compute Palm's taxable income.

The stock of Wheel Corporation,a U.S.company,is publicly traded,with no single shareholder owning more than 5 percent of its outstanding stock.Wheel owns 90 percent of the outstanding stock of Axle,Inc,also a U.S.company.Axle owns 100% of the outstanding stock of Tire Corporation,a German company.Wheel and Tire each own 50 percent of the outstanding stock of Bumper,Inc.,a U.S.company.Wheel and Axle each own 50 percent of the outstanding stock of Trunk Corporation,a U.S.company.Which of these corporations form an affiliated group eligible to file a consolidated tax return?

John's,Inc.manufactures and sells fine furniture.What is John's regular tax liability if it had taxable income of $40,000,000?

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

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

A corporate taxpayer would prefer a $50,000 deduction to a $50,000 credit.

A nonprofit corporation may incur a federal income tax if it has unrelated business income.

Calliwell Corporation is a Colorado corporation engaged in the manufacture and sale of computer components.This year,it earned $2 million of net income from this qualified activity.Before the domestic production activities deduction,its taxable income is $2,100,000 and compensation paid to its U.S.workforce is $670,000.Its allowable domestic production activities deduction is:

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?

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

Honu,Inc.has book income of $1,200,000.Book income includes $620,000 income tax expense,$10,000 of municipal bond interest income,and $150,000 of meals and entertainment expense.Based only on these items,compute Honu's taxable income.

In determining the incidence of the corporate income tax:

If a corporation's depreciation expense for regular tax purposes is $32,000 and its depreciation expense for alternative minimum tax purposes is $28,000,such corporation will have a negative (decrease)depreciation adjustment for alternative minimum taxable income.

Which of the following statements regarding the taxation of corporate profits is true?

Brace,Inc.owns 90% of West common stock.This year,Brace generated $50,000 operating income and received $10,000 dividends from West.Brace's taxable income is:

Corporations with taxable incomes in excess of $18,333,333 have a 35% marginal tax rate and a 35% average tax rate.

Slipper Corporation has book income of $500,000.Book income includes a $50,000 gain on the sale of equipment.The equipment originally cost $110,000 and was sold for $75,000.Accumulated book depreciation was $85,000; accumulated MACRS depreciation was $90,000.Based only on these items,compute Slipper's taxable income.