Exam 11: The Corporate Income Tax

The Guava Corporation has book net income of $90,000 for the current year.Included in this figure are the following items which are reported on the corporation's Schedule M-1, Reconciliation of Income (Loss)per Books with Income per Return.​ 1. Federal income tax expense 2. Depreciation deducted on books, not deductible for tax purposes 3. Deduction for 50 percent of meals expense not allowed for tax purposes 4. Deduction for payroll tax penalties not allowed for tax purposes 5. Tax exempt interest income included in book income but not in tax return income Based on the above information, calculate the Guava Corporation's taxable income for the year.Show your calculations.

The Great Gumball Corporation is a gumball producer.The corporation has accumulated earnings of $425,000 and it can establish a reasonable need for $360,000.Calculate the amount of the accumulated earnings tax, if any, that will be imposed on the corporation.

Brokers' fees incurred in the issuance of a corporation's stock are considered organizational expenditures.

In the current year, Parvifolia, Inc.had $400,000 of revenue from operations and $160,000 of dividends from nonaffiliated 15-percent-owned domestic corporations.The corporation's deductible operating expenses totaled $410,000.What is Parvifolia, Inc.'s dividends received deduction for the current year?

Which of the following items is not generally a schedule M-1 adjustment?

Which of the following is not a requirement for qualification as an S corporation?

The accumulated earnings tax is designed to prevent shareholders from avoiding tax at the shareholder level.

On July 1, of the current year, Robert forms the Yew Corporation.In exchange for 100 percent of the corporation's stock, Robert contributes land with a fair market value of $100,000.Robert acquired the land 5 years ago at a cost of $30,000.At the date of the contribution, the land is subject to a $10,000 mortgage which the corporation assumes.What is the basis of the land to Yew Corporation?

ABC Company owns 40 percent of JMT Company and 95 percent of DEM Company.JMT pays an $80,000 dividend to ABC and DEM pays a $40,000 dividend to ABC in the current year.Assuming that ABC has $1,000,000 of taxable income, calculate ABC's dividends received deduction for the current year.

A corporation may be subject to both the accumulated earnings tax and the personal holding company tax in the same year.

A corporation may elect to take a credit for dividends paid in lieu of claiming a dividends-received deduction.

The Sapote Corporation is a manufacturing corporation.The corporation has accumulated earnings of $450,000 and the corporation cannot establish a reasonable business need for any of that amount.What is the amount of the accumulated earnings tax, if any, that will be imposed on the corporation?

Corporations can elect to deduct up to $5,000 of organizational costs in the year they begin business, assuming their total organizational expenses do not exceed $50,000.

If the shareholders of an S corporation voluntarily revoke the corporation's S corporation status in the sixth month of the tax year and the revocation does not specify a prospective revocation date, the corporation is a regular corporation for that tax year.

In general, estimated payments for calendar-year corporations are due on:

S corporations pay taxes at a higher rate than do regular corporations.

Corporations are granted favorable tax treatment for short-term capital losses.

In 2018, corporations pay a flat 21 percent federal income tax.

Corporations may deduct without limitation any amount of charitable contributions providing the amounts are paid to qualified organizations.

Which of the following statements is true of corporations?