Exam 11: The Corporate Taxpayer

Torquay Inc.'s 2011 taxable income was $9,782,200, and its tax liability was $3,325,948. Torquay's director of tax estimates that the corporation's 2012 taxable income will be $13,350,000. Use the corporate tax rate schedule to compute Torquay's 2011 estimated tax payment due on April 15, 2012.

For a consolidated group of corporations, Schedule M-3 reconciles worldwide financial statement net income to the financial statement net income of those corporations permitted to be included in the U.S. consolidated tax return group.

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

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.

Bisou Inc. made a $48,200 contribution to charity this year. Only $39,000 of the contribution was deductible. Bisou can carry the $9,200 nondeductible contribution back three years and forward five years.

Loda Inc. made an $8,300 nondeductible charitable contribution and a $2,000 nondeductible political contribution this year. Which of the following statements is true?

Aaron, Inc. is a nonprofit corporation that collects and distributes food for needy families. Aaron, Inc. also operates a small grocery store for profit. Which of the following statements is true?

The corporate alternative minimum tax is designed to insure that corporations with substantial economic income will pay their fair share of the federal tax burden.

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.

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

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

The domestic production activities deduction is a permanent book/tax difference.

Wave Corporation owns 90% of the stock of Surf, Inc. Each corporation reports the following separate items for the current tax year: Compute consolidated taxable income if Wave and Surf file a consolidated federal income tax return:

Silver Bullet Inc. reported the following for its current tax year: Compute Silver Bullet's total income tax liability.

Palm Corporation has book income of $424,000. Book income reflects $200,000 income tax expense and $55,000 depreciation expense. Tax depreciation expense computed under MACRS is $65,000. Palm received $25,000 of prepaid rent not included in book income. Based only on these items, compute Palm's taxable income.

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?

Aloha, Inc. had the following results for its first two years of operation: Which of the following statements is true?

A nonprofit corporation may incur a federal income tax if it has unrelated business income.

A corporate taxpayer would prefer a $50,000 deduction to a $50,000 credit.

The stock of closely held corporations is typically restricted as to transferability by some type of buy-sell agreement.