Exam 11: The Corporate Taxpayer

In terms of dispersal of ownership,corporations are classified as either closely held or publicly held.

The federal tax law considers the member corporations of an affiliated group to be a single entity for federal tax purposes.An example of this treatment is the requirement to share the 15% tax bracket.

Thunder,Inc.has invested in the stock of several corporations and has $500,000 operating income before dividends: Calculate Thunder's dividends-received deduction and taxable income:

For a consolidated group of corporations,Schedule M-3 reconciles worldwide financial statement net income to the financial statement net income of those corporations permitted to be included in the U.S.consolidated tax return group.

Corporations are allowed a deduction for charitable contributions,limited to 10 percent of taxable income before the deduction.

Morton Inc.is a Kansas corporation engaged exclusively in domestic manufacturing.This year,it earned $500,000 of qualified production income,which also equals its taxable income before the domestic manufacturing deduction.It paid compensation of $200,000 to its workforce.Calculate Morton's domestic production activities deduction and taxable income:

Which of the following statements regarding Schedule M-1 is true?

The domestic production activities deduction is a permanent book/tax difference.

A corporation's minimum tax credit can reduce the corporation's future regular tax liability if regular tax liability exceeds tentative minimum tax in that year.

Donatoni Corporation owns 40% of Market,Inc.voting common stock.During the current year,Donatoni received a $30,000 dividend from Market.Donatoni must report the dividend as gross income,and is allowed a $21,000 dividends-received deduction.

In its first taxable year,Platform,Inc.generated a $200,000 net operating loss and made a $10,000 cash donation to a local charity.In its second year,Platform generated $350,000 operating income and made a $20,000 donation to the same charity.Compute Platform's taxable income for its second year.

New York,Inc.owns 100% of Brooklyn,Inc.and Queens,Inc.Taxable income for the three corporations for their first year was as follows: Which of the following statements is false?

Forward Inc.'s book income of $739,000 includes a net long-term capital loss of $42,000 and charitable contribution of $170,000.Taxable income shown on the Schedule M-1 would be:

Which of the following could cause a corporation's alternative minimum taxable income to be lower than regular taxable income?

Corporations are required to pay their federal tax liability in four quarterly estimated tax installments.

Lexington Associates,Inc.is a personal service corporation.This year,Lexington reported $75,000 of taxable income.Which of the following statements regarding Lexington's regular tax liability is true?

Which of the following is a primary legal characteristic of the corporate form of business?

A nondeductible charitable contribution is a permanent book/tax difference.

Which of the following statements about the calculation of alternative minimum taxable income is true?

Dividends-received deductions generally are not allowed for dividends from foreign corporations.