Exam 16: Corporate Operations

Bingo Corporation incurred a net operating loss in 2014. If it carries the loss back, it must first carry the loss back to offset its 2013 taxable income and then it carries any remaining loss back to offset its 2012 taxable income.

Corporations compute their dividends received deduction by multiplying the dividend amount by 10%, 50%, or 100% depending on their ownership in the distributing corporation's stock.

What is the unextended due date of the tax return of a calendar-year corporation?

Which of the following is not an acceptable method of determining the required annual payment of federal income tax for corporations?

AmStore Inc. sold some of its heavy machinery at a gain. AmStore used the straight-line method for financial accounting depreciation and MACRS for tax cost-recovery. If accumulated depreciation for financial accounting purposes is less than accumulated depreciation for tax reporting purposes, what is the nature of the book-tax difference associated with the gain on the sale?

Which of the following statements regarding incentive stock options (ISOs) is false?

Taxable income of the most profitable corporations is subject to a flat 35% tax rate.

XPO Corporation has a minimum tax credit of $51,000 from 2013. If its 2014 tentative minimum tax is $211,000 and its regular tax liability is $250,000, what is its minimum tax credit carryover to 2015?

Which of the following is not a type of controlled group as defined in the Internal Revenue Code?

Atom Ventures Inc. (AV) owns stock in the Primo and Faraday corporations. The following summarizes information relating to AV's investment in Primo and Faraday as follows: Corporation Corporation's earnings for year Atom's ownership Dividends distributed to Atom during year Primo \ 625,000 35\% \ 125,000 Faraday \ 940,000 10\% \ 50,000 Assuming that AV follows the general rules for reporting its income from these investments, what is the amount of AV's book-tax difference associated with the investment in these corporations (disregarding the dividends received deduction)? Is it favorable or unfavorable? Is it permanent or temporary?

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

Rapidpro Inc. had more than $1,000,000 of taxable income two years prior to the current year. It would like to use its prior year tax liability (which was very low but above zero) to determine its quarterly estimated payments this year. Which of the following statements is true?

Canny Foods Co. is considering three ways it could contribute to a local, qualified charity. First, it could give $5,000 in cash. Second, it could give stock it initially purchased two years ago for $4,000 but is now worth $6,000. Third, it could give items of inventory with a fair market value of $7,000 but with an adjusted basis of $3,000. Which of the following correctly describes the relation among possible charitable contributions in terms of amount deductible for tax purposes?

In January 2013, Khors Company issues nonqualified stock options to its CEO, Jenny Svaro. Because the company does not expect Ms. Svaro to leave the company, the options vest at the time they are granted with a total value of $50,000. In December of 2014, the company experiences a surge in its stock price, and Ms. Svaro exercises the options. The total bargain element at the time of exercise is $60,000. For 2014, what is the book-tax difference due to the options exercised?

The amount of a corporation's AMT is the amount of its tentative minimum tax in excess of its regular tax.

For corporations, which of the following regarding net capital losses is true?

In 2014, US Sys Corporation received $250,000 in death benefits after its CEO (a key employee) died (it included this amount in book income). For book purposes, US Sys also expensed life insurance premiums for other key employees in the amount of $20,000. In addition, for book purposes, it expensed $10,000 of meals and entertainment expenditures. What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the book-tax difference is temporary and what amount is permanent?

In the current year, FurnitureKing Corporation recognized $32,000 of income from an installment sale it made in a previous tax year. If installment sales are the only difference between ACE and alternative minimum taxable income (before the ACE adjustment), what is the amount and nature of the ACE adjustment for the current tax year?

Jazz Corporation owns 10% of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before the dividend was ($2,000). What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Which of the following statements regarding book-tax differences associated with purchased goodwill is false?