Question 1

Which of the following is not an AMT adjustment?

Accepted Answer

A)  Adjustment for depreciation 
B)  Adjustment of gain or loss on sale of depreciable assets 
C)  Adjustment for adjusted current earnings (AC
E)  
D)  Adjustment for domestic production activities deduction 
A)  Adjustment for depreciation 
B)  Adjustment of gain or loss on sale of depreciable assets 
C)  Adjustment for adjusted current earnings (AC
E)  
D)  Adjustment for domestic production activities deduction

Question 2

NOL and capital loss carryovers are deductible in calculating the charitable contribution limit modified taxable income, while NOL and capital loss carrybacks are not.

Accepted Answer

A) True 
 B)False

Question 3

Net capital loss carryovers but not carrybacks are deductible against capital gains in determining a corporation's net operating loss for the year.

Accepted Answer

A) True 
 B)False

Question 4

The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

Accepted Answer

A) True 
 B)False

Question 5

For book purposes, RadioAircast Inc. reported $15,000 of income from municipal bonds in 2013. It also expensed $12,000 of radio station filing fines paid to the FCC the same year. What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the total adjustment is permanent and what amount is temporary?

Accepted Answer

$3,000, favorable bo

Question 6

Which of the following statements regarding AMT is true?

Accepted Answer

A)  Only very profitable companies (AMTI greater than $1 million) have their AMT exemption phased out. 
B)  The AMT exemption is phased out dollar for dollar as AMTI increases. 
C)  Minimum tax credits are generated whenever regular tax liability exceeds tentative minimum tax. 
D)  Minimum tax credits can be carried forward indefinitely. 
A)  Only very profitable companies (AMTI greater than $1 million) have their AMT exemption phased out. 
B)  The AMT exemption is phased out dollar for dollar as AMTI increases. 
C)  Minimum tax credits are generated whenever regular tax liability exceeds tentative minimum tax. 
D)  Minimum tax credits can be carried forward indefinitely.

Question 7

Tatoo Inc. reported a net capital loss of $13,000 in 2014. It had a net capital gain of $4,300 in 2012 and $3,000 in 2011. In 2013, although the company suffered a net operating loss, it had net capital gains of $1,000. What is the amount of the Tatoo's capital loss carryover remaining after it applies the carryback?

Accepted Answer

A)  $4,700 
B)  $5,700 
C)  $8,700 
D)  $13,000 
A)  $4,700 
B)  $5,700 
C)  $8,700 
D)  $13,000

Question 8

For a corporation, goodwill created in an asset acquisition generally leads to temporary book-tax differences.

Accepted Answer

A) True 
 B)False

Question 9

Coop Inc. owns 40% of Chicken Inc., both Coop and Chicken are corporations. Chicken pays Coop a dividend of $10,000 in 2014. Chicken also reports financial accounting earnings of $20,000 for that year. Assume that Coop follows the general rule of accounting for investment in Chicken. What is the amount and nature of the book-tax difference to Coop associated with the dividend distribution (ignoring the dividends received deduction)?

Accepted Answer

A)  $2,000 unfavorable 
B)  $2,000 favorable 
C)  $10,000 unfavorable 
D)  $10,000 favorable 
E)  None of these 
A)  $2,000 unfavorable 
B)  $2,000 favorable 
C)  $10,000 unfavorable 
D)  $10,000 favorable 
E)  None of these

Question 10

In a given year, Adams Corporation has goodwill impairment in excess of the allowable amortization for tax purposes. It has a favorable temporary book-tax difference for that year.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following regarding Schedule M-1 and Schedule M-3 of Form 1120 is false?

Accepted Answer

A)  In general, smaller corporations are required to complete Schedule M-1 while larger corporations are required to complete Schedule M-3. 
B)  Schedule M-3 lists more book-tax differences than Schedule M-1. 
C)  Both Schedules M-1 and M-3 reconcile to a corporation's bottom line taxable income. 
D)  Schedule M-1 does not distinguish between temporary and permanent book-tax differences whereas Schedule M-3 does. 
A)  In general, smaller corporations are required to complete Schedule M-1 while larger corporations are required to complete Schedule M-3. 
B)  Schedule M-3 lists more book-tax differences than Schedule M-1. 
C)  Both Schedules M-1 and M-3 reconcile to a corporation's bottom line taxable income. 
D)  Schedule M-1 does not distinguish between temporary and permanent book-tax differences whereas Schedule M-3 does.

Question 12

Which of the following statements regarding excess charitable contributions (contributions in excess of the modified taxable income limitation) by corporations is true?

Accepted Answer

A)  Corporations may not carry over or carry back excess charitable contributions. 
B)  Corporations can carry excess charitable contributions over to a future year or back to a prior year. 
C)  Corporations can carry excess charitable contributions over to a future year but not back to a prior year. 
D)  Corporations can carry excess charitable contributions back to a prior year but not over to a future year. 
A)  Corporations may not carry over or carry back excess charitable contributions. 
B)  Corporations can carry excess charitable contributions over to a future year or back to a prior year. 
C)  Corporations can carry excess charitable contributions over to a future year but not back to a prior year. 
D)  Corporations can carry excess charitable contributions back to a prior year but not over to a future year.

Question 13

Corporation A receives a dividend from CorporationB. Corporation A includes the dividend in its gross income for tax and financial accounting purposes (no book-tax difference). If A has accounted for the dividend correctly (following the general rule), how much of B stock does A own?

Accepted Answer

A)  A owns less than 20 percent of the stock of B 
B)  A owns at least 20 but not more than 50 percent of the stock of B 
C)  A owns more than 50 percent of the stock of B 
D)  Cannot be determined 
A)  A owns less than 20 percent of the stock of B 
B)  A owns at least 20 but not more than 50 percent of the stock of B 
C)  A owns more than 50 percent of the stock of B 
D)  Cannot be determined

Question 14

In the current year, Auto Rent Corporation reported the following taxable income at the end of its first, second, and third quarters: $$\begin{array} { | l | c | } 
\hline { \text { Quarter } } & \begin{array} { c } 
\text { Cumulative } \
\text { Taxable Income }
\end{array} \
\hline \text { First } & \$ 1,500,000 \
\hline \text { Second } & \$ 2,800,000 \
\hline \text { Third } & \$ 3,600,000 \
\hline
\end{array}$$ What amount of estimated tax payments would Auto Rent pay each quarter in order to avoid estimated tax penalties under the annualized income method of computing estimated tax payments?

Accepted Answer

First quarter $510,000; ($1,500,000 × 4

Question 15

Netgate Corporation's gross regular tax liability for 2014 was $95,375. What was its taxable income?

Accepted Answer

None

Question 16

The dividends received deduction cannot cause a net operating loss. The deduction can reduce income to zero but not below zero.

Accepted Answer

A) True 
 B)False

Question 17

Remsco has taxable income of $60,000 and a charitable contribution limit modified taxable income of $72,000. Its charitable contributions for the year were $7,500. What is Remsco's current-year charitable contribution deduction and contribution carryover?

Accepted Answer

A)  $6,000 current-year deduction; $1,500 carryover 
B)  $7,500 current-year deduction; $0 carryover 
C)  $1,200 current-year deduction; $6,300 carryover 
D)  $7,200 current-year deduction; $300 carryover 
A)  $6,000 current-year deduction; $1,500 carryover 
B)  $7,500 current-year deduction; $0 carryover 
C)  $1,200 current-year deduction; $6,300 carryover 
D)  $7,200 current-year deduction; $300 carryover

Question 18

Which of the following describes the correct treatment of nonqualified stock options (NQOs) granted when ASC 718 (a codification of FAS 123R) did not apply?

Accepted Answer

A)  Financial-no expense; tax-no deduction 
B)  Financial-no expense; tax-deduct bargain element at exercise 
C)  Financial-expense value over vesting period; tax-no deduction 
D)  Financial-expense value over vesting period; tax-deduct bargain element at exercise 
A)  Financial-no expense; tax-no deduction 
B)  Financial-no expense; tax-deduct bargain element at exercise 
C)  Financial-expense value over vesting period; tax-no deduction 
D)  Financial-expense value over vesting period; tax-deduct bargain element at exercise

Question 19

AR Systems Inc. (AR) had $120,000 of tax liability last year. It anticipates a current-year tax liability of $500,000. Assuming AR is considered a large corporation for purposes of estimating tax liability, what are the minimum estimated tax payments it should make to avoid underpayment penalties? Ignore the annualized income method.

Accepted Answer

Q1: $30,000, Q2: $220,000, Q3: $125,000,

Question 20

Which of the following statements regarding book-tax differences is true?

Accepted Answer

A)  Corporations are not required to report book-tax differences on their income tax returns. 
B)  Corporations will eventually recognize the same amount of income for book and tax purposes for income-related temporary book-tax differences. 
C)  Income excludable for tax purposes usually creates a temporary book-tax difference. 
D)  None of these is true. 
A)  Corporations are not required to report book-tax differences on their income tax returns. 
B)  Corporations will eventually recognize the same amount of income for book and tax purposes for income-related temporary book-tax differences. 
C)  Income excludable for tax purposes usually creates a temporary book-tax difference. 
D)  None of these is true.

Which of the following is not an AMT adjustment?

NOL and capital loss carryovers are deductible in calculating the charitable contribution limit modified taxable income, while NOL and capital loss carrybacks are not.

Net capital loss carryovers but not carrybacks are deductible against capital gains in determining a corporation's net operating loss for the year.

The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

Which of the following statements regarding AMT is true?

For a corporation, goodwill created in an asset acquisition generally leads to temporary book-tax differences.

In a given year, Adams Corporation has goodwill impairment in excess of the allowable amortization for tax purposes. It has a favorable temporary book-tax difference for that year.

Which of the following regarding Schedule M-1 and Schedule M-3 of Form 1120 is false?

Which of the following statements regarding excess charitable contributions (contributions in excess of the modified taxable income limitation) by corporations is true?

Corporation A receives a dividend from CorporationB. Corporation A includes the dividend in its gross income for tax and financial accounting purposes (no book-tax difference). If A has accounted for the dividend correctly (following the general rule), how much of B stock does A own?

Netgate Corporation's gross regular tax liability for 2014 was $95,375. What was its taxable income?

The dividends received deduction cannot cause a net operating loss. The deduction can reduce income to zero but not below zero.

Remsco has taxable income of $60,000 and a charitable contribution limit modified taxable income of $72,000. Its charitable contributions for the year were $7,500. What is Remsco's current-year charitable contribution deduction and contribution carryover?

Which of the following describes the correct treatment of nonqualified stock options (NQOs) granted when ASC 718 (a codification of FAS 123R) did not apply?

Which of the following statements regarding book-tax differences is true?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning of the Cfa Institute

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Exam 16: Corporate Operations

Which of the following is not an AMT adjustment?

NOL and capital loss carryovers are deductible in calculating the charitable contribution limit modified taxable income, while NOL and capital loss carrybacks are not.

Net capital loss carryovers but not carrybacks are deductible against capital gains in determining a corporation's net operating loss for the year.

The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

Which of the following statements regarding AMT is true?

For a corporation, goodwill created in an asset acquisition generally leads to temporary book-tax differences.

In a given year, Adams Corporation has goodwill impairment in excess of the allowable amortization for tax purposes. It has a favorable temporary book-tax difference for that year.

Which of the following regarding Schedule M-1 and Schedule M-3 of Form 1120 is false?

Which of the following statements regarding excess charitable contributions (contributions in excess of the modified taxable income limitation) by corporations is true?

Corporation A receives a dividend from CorporationB. Corporation A includes the dividend in its gross income for tax and financial accounting purposes (no book-tax difference). If A has accounted for the dividend correctly (following the general rule), how much of B stock does A own?

Netgate Corporation's gross regular tax liability for 2014 was $95,375. What was its taxable income?

The dividends received deduction cannot cause a net operating loss. The deduction can reduce income to zero but not below zero.

Remsco has taxable income of $60,000 and a charitable contribution limit modified taxable income of $72,000. Its charitable contributions for the year were $7,500. What is Remsco's current-year charitable contribution deduction and contribution carryover?

Which of the following describes the correct treatment of nonqualified stock options (NQOs) granted when ASC 718 (a codification of FAS 123R) did not apply?

Which of the following statements regarding book-tax differences is true?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning of the Cfa Institute

Filters