Exam 11: The Corporate Taxpayer

Bisou Inc. made a $48,200 contribution to charity this year. Only $39,000 of the contribution was deductible. Bisou can carry the $9,200 nondeductible contribution back three years and forward five years.

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.

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

The corporate characteristic of limited liability is more important to the shareholders than the characteristic of centralized management.

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

The taxable income earned by a personal service corporation is taxed at a flat rate of 35%.

Silver Bullet Inc. reported the following for its current tax year: Regular taxable income \ 200,000 AMTI in excess of exemption 416,250 Compute Silver Bullet's total income tax liability.

Torquay Inc.'s 2015 taxable income was $9,782,200, and its tax liability was $3,325,948. Torquay's director of tax estimates that the corporation's 2016 taxable income will be $13,350,000. Use the corporate tax rate schedule to compute Torquay's 2016 estimated tax payment due on April 15, 2016.

Westside, Inc. owns 15% of Innsbrook's common stock. This year, Westside generated $50,000 operating income and received $20,000 dividends from Innsbrook. Westside's taxable income is:

A significant advantage of issuing stock instead of debt is that payment of dividends is discretionary.

Gosling, Inc., a calendar year, accrual basis corporation, reported $756,000 net income after tax on its financial statements prepared in accordance with GAAP. The corporation's financial records reveal the following information: · Gosling earned $478,000 from a qualified domestic production activity. · Gosling earned $3,500 on an investment in tax-exempt municipal bonds. · Gosling's depreciation expense per books was $72,000, and its MACRS depreciation deduction was $105,000. · Gosling recorded $58,000 of business meals and entertainment expense for book purposes. · Gosling's federal income tax expense per books was $440,000. a. Compute Gosling's taxable income and regular tax liability. b. Prepare a Schedule M-1, page 5, Form 1120, reconciling Gosling's book and taxable income.

In determining the incidence of the corporate income tax:

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

Sonic Corporation has a 35% marginal tax rate and received $10,000 of dividends from Roller, Inc., a U.S. corporation in which Sonic owns less than 2% of the outstanding stock. Sonic's effective tax rate on the Roller dividend is:

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

Corporations are rarely targeted in political debates over taxation.

Franton Co., a calendar year, accrual basis corporation, reported $2,076,000 net income after tax on its 2015 financial statements prepared in accordance with GAAP. The corporation's financial records reveal the following information. · Federal tax expense per books was $1,069,000. · 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.

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 taxable income is:

The domestic production activities deduction is computed as a percentage of the greater of taxable income or net income from qualified production activities.

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: