Exam 11: The Corporate Taxpayer

The Schedule M-3 reconciliation requires less detailed information than the M-1 reconciliation.

The rate schedule for determining the regular tax liability of a corporation includes rates ranging from 15% to 39%.

The four primary legal characteristics of a corporation are unlimited liability, limited life, free transferability of interests, and centralized management.

Doctors Inc. is a corporation owned by four physicians in which they operate their medical practice. For the current year, Doctors Inc. had taxable income of $135,000. What is its regular tax liability?

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.

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?

Sunny Vale Co. reported the following for the current tax year: Regular taxable income \ 105,000 AMTI in excess of exemption 116,250 Compute Sunny Vale's total income tax liability.

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 deprecation was $90,000. Based only on these items, compute Slipper's taxable income.

Which of the following statements regarding the domestic production activities deduction is false?

The burden of corporate taxation is often borne by corporate shareholders, customers, employees, and suppliers.

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.

Alexus Inc.'s alternative minimum taxable income before any AMT exemption is $210,000. Compute the corporation's AMT exemption:

The corporate alternative minimum tax rate is 26% of AMTI in excess of the AMT exemption.

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

The corporate characteristic of free transferability exists if the corporate stock is subject to a buy-sell agreement.

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

Rogers, Inc. owns 12% of Lampe Corporation's voting common stock. During the current year, Rogers generated $50,000 operating income and received $8,000 dividends from Lampe. Only $1,600 of the dividend is taxable.

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

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

Borough, Inc. is entitled to a rehabilitation credit of $500,000 for its current tax year. The corporation's regular tax liability is $450,000. No estimated tax payments have been made. Which of the following statements is true?