Exam 11: The Corporate Taxpayer

Loraine Manufacturing, Inc. reported the following for the current tax year: Regular taxable income \ 95,000 Regular tax liability 22,250 Depreciation allowed under MACRS 25,000 Depreciation allowed under ADS 38,000 Excess percentage depletion deduction 40,000 What is Loraine Manufacturing's alternative minimum taxable income before any AMT exemption?

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

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.

Loda Inc. made an $8,300 nondeductible charitable contribution and a $2,000 nondeductible political contribution this year. Which of the following statements is true?

A corporation that is unable to meet its original filing deadline may obtain an automatic twelve-month extension of the time to file its federal income tax return.

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

Tropical Corporation was formed in 2013. For 2013 through 2015, its regular and tentative minimum tax were as follows: Year Regular Tax Tentative Minimum Tax 2013 \ 400,000 \ 370,000 2014 300,000 350,000 2015 375,000 400,000 a. Compute Tropical's tax due for each year b. In 2016, Tropical's regular taxable income is $2,000,000, and it has positive AMT adjustments of $500,000 and AMT preferences of $600,000. Compute Tropical's regular tax, tentative minimum tax, and tax due for 2016.

Pocahontas, Inc. had the following results for its first two years of operation: Regular tax liability \ 231,200 \ 130,000 Tentative minimum tax \ 158,000 \ 150,000 Which of the following statements is true?

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:

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

At least three corporations are required to form an affiliated group.

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

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:

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

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?

Generally, the corporate income tax is computed on a proportionate rate schedule.

An affiliated group consists of a parent company that directly owns 80% of at least one subsidiary corporation plus all other subsidiaries that are 80% owned within the group.

Which of the following statements regarding Schedule M-1 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.

Angel Corporation's current-year regular tax liability is $40,000. Angel is eligible for a general business credit of $45,000. The corporation will receive a $5,000 refund of federal income tax.