Exam 11: The Corporate Taxpayer

Calliwell Corporation is a Colorado corporation engaged in the manufacture and sale of computer components. In 2012, 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 2012 taxable income is:

In its first taxable year, Platform, Inc. generated a $200,000 net operating loss and made a $10,000 cash donation to a local charity. In its second year, Platform generated $350,000 operating income and made a $20,000 donation to the same charity. Compute Platform's taxable income for its second year.

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.

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.

Which of the following statements about the calculation of alternative minimum taxable income is true?

This year, Sonoma Corporation received the following dividends: Before considering the above dividends, Sonoma has taxable income of $550,000. Calculate Sonoma's allowable dividends-received deduction and taxable income.

Generally, the corporate income tax is computed on a proportionate rate schedule.

Angel Corporation's current-year regular tax liability is $40,000. Angel is eligible for a general business credit of $45,000. The corporation will receive a $5,000 refund of federal income tax.

Corporation F owns 95 percent of the outstanding stock of Corporation G. This year, the corporations' records provide the following information:

Dividends-received deductions generally are not allowed for dividends from foreign corporations.

Thunder, Inc. has invested in the stock of several corporations and has $500,000 operating income before dividends. Calculate Thunder's dividends-received deduction and taxable income:

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:

Airfreight Corporation has book income of $370,000. Book income includes a $25,000 gain realized on a like-kind nontaxable exchange of equipment. Based only on these items, compute Airfreight's taxable income.

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

At least three corporations are required to form an affiliated group.

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:

Tropical Corporation was formed in 2007. For 2007 through 2009, its regular and tentative minimum tax were as follows: a. Compute Tropical's tax due for each year b. In 2010, Tropical's regular taxable income is $2,000,000, and it has positive AMT adjustments of $500,000 and AMT preferences of $600,000. Compute Tropical's regular tax, tentative minimum tax, and tax due for 2010.

Morton Inc. is a Kansas corporation engaged exclusively in domestic manufacturing. In 2012, it earned $500,000 of qualified production income, which also equals its taxable income before the domestic manufacturing deduction. It paid compensation of $200,000 to its workforce. Calculate Morton's 2012 domestic production activities deduction and taxable income:

Calliwell Corporation is a Colorado corporation engaged in the manufacture and sale of computer components. In 2012, 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 allowable 2012 domestic production activities deduction is:

Donatoni Corporation owns 40% of Market, Inc. voting common stock. During the current year, Donatoni received a $30,000 dividend from Market. Donatoni must report the dividend as gross income, and is allowed a $21,000 dividends-received deduction.