Exam 11: The Corporate Taxpayer

Which of the following statements regarding the taxation of corporate profits is true?

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

WEK Inc. is a New York corporation with manufacturing operations in the United States and in 12 foreign countries. This year, its taxable income from domestic manufacturing was $1,239,000, and its taxable income from foreign manufacturing was $1,773,000. WEK had no other sources of taxable income. WEK paid $487,000 compensation to its U.S. workers and $599,200 compensation to its foreign workers. Compute WEK's taxable income.

Corporations are required to pay their federal tax liability in four quarterly estimated tax installments.

The purpose of Schedule M-1 is to explain the differences between financial statement income and taxable income.

The domestic production activities deduction is computed as a percentage of the greater of taxable income or net income from qualified production activities.

The Schedule M-3 reconciliation requires less detailed information than the M-1 reconciliation.

Which of the following could cause a corporation's alternative minimum taxable income to be lower than regular taxable income?

An affiliated group consists of a parent company that directly owns 80% of at least one subsidiary corporation plus all other subsidiaries that are 80% owned within the group.

The rate schedule for determining the regular tax liability of a corporation includes rates ranging from 15% to 39%.

Fleet, Inc. owns 85% of the stock of Pete, Inc. and 35% of the stock of Zete, Inc. and 90% of the stock of Stock ownership of Bete, Inc. Bete owns 5% of the stock of Pete and 5% of the stock of Zete. Zete owns 10% of the stock of Bete. The remaining stock of Pete and Zete is owned by unrelated individuals. Which of the following statements is correct?

Joanna has a 35% marginal tax rate and owns 100% of the stock of Loman Corporation. This year, Loman generated $400,000 of taxable income, paid $136,000 of corporate income tax, and paid a $50,000 dividend to Joanna. Suppose that the federal income tax system has been amended to allow shareholders to gross up dividend income by the corporate tax paid with respect to the dividend and credit this tax against their individual tax. Further assume that dividends-received by individuals are not eligible for a preferential tax rate. Calculate Joanna's reported dividend income and her tax due on the dividend.

Corporations are rarely targeted in political debates over taxation.

The dividends-received deduction is equal to 80% of any dividends-received by a corporate taxpayer.

Loraine Manufacturing, Inc. reported the following for the current tax year: What is Loraine Manufacturing's alternative minimum taxable income before any AMT exemption?

Which of the following is a means to avoid the double taxation burden imposed on the profits of corporations?

Harmon, Inc. was incorporated and began business on January 1, 2011. Its tax liability for 2011 was $36,000. Its tax liability for 2012 was $50,000. Which of the following is a correct statement concerning the payment of estimated taxes for 2012?

The corporate characteristic of free transferability exists if the corporate stock is subject to a buy-sell agreement.

Frazier, Inc. paid a $150,000 cash dividend to its shareholders. The corporation cannot deduct this payment on its corporate income tax return.

Which of the following statements regarding the tax treatment of corporate dividends is true?