Exam 11: The Corporate Taxpayer

Wave Corporation owns 90% of the stock of Surf, Inc. Each corporation reports the following separate items for the current tax year: Wave Surf Ordinary operating income (loss) \ 500,000 \ (100,000) Capital gain (loss) (5,000) 7,000 Section 1231 gain (loss) 3,000 (10,000) Compute consolidated taxable income if Wave and Surf file a consolidated federal income tax return:

Corporation F owns 95 percent of the outstanding stock of CorporationG. This year, the corporations' records provide the following information: Corporation F Corporation G Ordinary income (loss) \ (500,000) \ 800,000 Capital gain (loss) 15,000 (20,000) Section 1231 gain (loss) 4,000 (3,000) Corporation F Corporation G Ordinary income (loss) \ (500,000) \ 800,000 Capital gain (loss) 15,000 (20,000) Section 1231 gain (loss) 4,000 (3,000) a. Compute each corporation's taxable income if they file separate tax returns. b. Compute consolidated taxable income if Corporation F and Corporation G file a consolidated tax return.

A corporation that owns more than $10 million of total assets uses which schedule to reconcile book income to taxable income?

Thunder, Inc. has invested in the stock of several corporations and has $500,000 operating income before dividends. Corporation Dividend Ownership \% Incorporated Hail, Inc. \ 52,000 14 Delaware Hurricane Company 17,500 62 France Lightening, Inc. 2,800 41 Utah Tornado Corporation 131,000 92 New Jersey Calculate Thunder's dividends-received deduction and taxable income:

Mandrake, Inc. has book income of $569,300. Its income includes a $50,700 bad debt expense, determined by the allowance method. Actual write offs this year were $48,000. Based only on this information, compute Mandrake's taxable income.

For a corporate taxpayer in the 34% marginal tax bracket, a $20,000 tax credit is equivalent to a $58,824 tax deduction.

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?

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

Corporations with more than $1 million taxable income must pay 100% of their current federal income tax liability in the form of quarterly estimate payments to avoid an underpayment penalty.

This year, Sonoma Corporation received the following dividends: Alpha, Inc. (a taxable Florida corporation in which Sonoma owns a 5\% stock interest) $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $\$ 30,000$ Beta, Inc. (a taxable Mexican corporation in which Sonoma owns a $25 \%$ stock interest) $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$20,000$ Gamma, Inc. (a taxable Texas corporation in which Sonoma owns a $50 \%$ stock interest) $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$50,000$ Before considering the above dividends, Sonoma has taxable income of $550,000. Calculate Sonoma's allowable dividends-received deduction and taxable income.

Poppy's book income of $739,300 includes a net long-term capital loss of $42,000 and federal income tax expense of $170,000. Based only on these items, Poppy's taxable income is:

Which of the following statements regarding Schedule M-3 is false?

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: 2011 \ 4,500,000 2012 8,200,000 2013 7,000,000 2014 9,900,000 2015 5,000,000 2016 4,000,000 For which of these years is Grumond exempt from AMT?

Harmon, Inc. was incorporated and began business on January 1, 2014. Its tax liability for 2014 was $36,000. Its tax liability for 2015 was $50,000. Which of the following is a correct statement concerning the payment of estimated taxes for 2015?

Most tax credits for which a corporate taxpayer would be eligible are nonrefundable.

AMT adjustments can only increase a corporation's alternative minimum taxable income.

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

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.

A corporation is required to report differences between book and taxable income on either Schedule M-1 or Schedule M-3 of the corporate income tax return.