Question 1

The corporate tax rates favor large corporations.

Accepted Answer

A) True 
 B)False

Question 2

In 2018, Apricot Corporation had taxable income of $120,000.Included in taxable income was a $10,000 capital gain.The $120,000 of taxable income does not include a $15,000 capital loss carryforward available from the previous year.What is Apricot Corporation's 2018 income tax liability before any tax credits?

Accepted Answer

A) $22.050 
B) $21,000 
C) $23,100 
D) $25,200 
E) None of the above 
A) $22.050 
B) $21,000 
C) $23,100 
D) $25,200 
E) None of the above

Question 3

Which of the following statements is not true of S corporations?

Accepted Answer

A) S corporations are corporations that receive tax treatment similar to that given partnerships. 
B) Section 1231 gains and losses pass through separately to stockholders of an S corporation. 
C) The amount of S corporation losses that a shareholder of an S corporation may report on his or her tax return is limited to the basis of the stock plus any loans made by the shareholder to the corporation. 
D) If a taxpayer purchases stock in an S corporation from another shareholder during the year, the new shareholder may report the entire amount of any loss for the year attributable to the shares purchased. 
E) If an otherwise qualifying shareholder acquires 40 percent of the stock of an S corporation, the new shareholder cannot cause the corporation to lose its S corporation election. 
A) S corporations are corporations that receive tax treatment similar to that given partnerships. 
B) Section 1231 gains and losses pass through separately to stockholders of an S corporation. 
C) The amount of S corporation losses that a shareholder of an S corporation may report on his or her tax return is limited to the basis of the stock plus any loans made by the shareholder to the corporation. 
D) If a taxpayer purchases stock in an S corporation from another shareholder during the year, the new shareholder may report the entire amount of any loss for the year attributable to the shares purchased. 
E) If an otherwise qualifying shareholder acquires 40 percent of the stock of an S corporation, the new shareholder cannot cause the corporation to lose its S corporation election.

Question 4

The accumulated earnings tax will not be imposed on accumulations that can be shown to be necessary to meet the reasonable needs of the business.

Accepted Answer

A) True 
 B)False

Question 5

Capital losses of a corporation must be used to offset capital gains and net capital losses may not be deducted from the ordinary income of a corporation.

Accepted Answer

A) True 
 B)False

Question 6

What is the maximum amount of accumulated earnings that a corporation is allowed to accumulate, without regard to business needs, before the accumulated earnings tax is imposed?

Accepted Answer

A) $150,000 for all corporations 
B) $150,000 for nonservice corporations only 
C) $250,000 for all corporations 
D) $250,000 for nonservice corporations only 
E) None of the above 
A) $150,000 for all corporations 
B) $150,000 for nonservice corporations only 
C) $250,000 for all corporations 
D) $250,000 for nonservice corporations only 
E) None of the above

Question 7

For the current year, the Beech Corporation has net income on its books of $60,000, including the following items: $\begin{array}{llcc}
  \text {Net capital losses  } & \$15,000 \
 \text {Federal income tax expense  } &\$25,000\
\end{array}$
 Federal tax depreciation exceeds the depreciation deducted on the books by $5,000.What is the corporation's taxable income?

Accepted Answer

A) $66,000 
B) $90,000 
C) $95,000 
D) $103,000 
E) None of the above 
A) $66,000 
B) $90,000 
C) $95,000 
D) $103,000 
E) None of the above

Question 8

Corporations are not allowed to amortize the costs of organizing the corporation.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is false in regards to filing requirements?

Accepted Answer

A) Corporations file their tax returns on Form 1120. 
B) A 6-month extension can be obtained by a corporation (other than a corporation with a tax year ending on June 30) that files Form 1120. 
C) Filing an extension for a corporate tax return also provides an extension for paying the corporation's tax due.A corporation can wait to pay its tax liability without penalty when the return is filed. 
D) None of the above is false. 
A) Corporations file their tax returns on Form 1120. 
B) A 6-month extension can be obtained by a corporation (other than a corporation with a tax year ending on June 30) that files Form 1120. 
C) Filing an extension for a corporate tax return also provides an extension for paying the corporation's tax due.A corporation can wait to pay its tax liability without penalty when the return is filed. 
D) None of the above is false.

Question 10

What is the purpose of Schedule M-1?

Accepted Answer

Schedule M-1 is included in corporate ta

Question 11

Rob, Bill, and Steve form Big Company.Rob performs $45,000 of services for his 45 shares of the company.Bill transferred property with a basis of $5,000 for $75,000 of stock (75 shares).Steve contributes cash of $100,000 for his 100 shares.Which of the three must recognize income in the year of the formation?

Accepted Answer

A) Rob 
B) Rob, Bill 
C) Bill 
D) Steve, Bill 
E) Steve, Rob 
A) Rob 
B) Rob, Bill 
C) Bill 
D) Steve, Bill 
E) Steve, Rob

Question 12

Fran, George, and Helen form FGH Corporation.In exchange for 300 shares of stock of the corporation, Fran contributes property with a basis of $15,000, fair market value of $50,000 and subject to a liability of $20,000 which the corporation assumed.George contributes property with a basis of $20,000, fair market value of $30,000 in exchange for 250 shares of stock of the corporation with a value of $25,000 plus $5,000 cash.Helen performs services for the corporation and receives $2,000 worth of stock (20 shares)in exchange for the services.
A)What is the amount of Fran's recognized gain or loss on the transaction?
B)What is Fran's basis in the stock of the corporation?
C)What is the corporation's basis in the property received from Fran?
D)What is the amount of George's recognized gain or loss on the transaction?
E)What is George's basis in the stock of the corporation?

Accepted Answer

A.$5,000 GAIN = $20,000 − $15,

Question 13

Harry forms the Nectarine Corporation during the current tax year.To form the corporation, Harry transfers assets having a fair market value of $650,000 to Nectarine Corporation for 100 percent of the corporation's stock.Harry's adjusted basis in the assets transferred was $375,000 and Nectarine Corporation assumed a $200,000 mortgage on the assets.If the fair market value of the stock received by Harry is $450,000, what is his basis in the stock received from the corporation?

Accepted Answer

A) $175,000 
B) $200,000 
C) $375,000 
D) $450,000 
E) None of the above 
A) $175,000 
B) $200,000 
C) $375,000 
D) $450,000 
E) None of the above

Question 14

Calculate the corporate tax liability in each of the following circumstances:
a.X Corporation has taxable income of $250,000 for its current calendar tax year.
b.Y Corporation has $1,600,000 in taxable income for the current tax year.
c.Z Corporation has taxable income of $100,000, before capital gains and losses, a short-term capital loss of $30,000, and a long-term capital gain of $10,000 in the current tax year.

Accepted Answer

a.$52,500 = $250,000

Question 15

A corporation may carry forward capital losses for an indefinite period.

Accepted Answer

A) True 
 B)False

Question 16

The Lagerstroemia Corporation was formed on January 1, 2018.Calculate the Lagerstroemia Corporation's taxable income or loss for 2018 given the following information:​ $\begin{array}{lr}
\text { Gross receipts } & \$ 255,000 \
\text { Cost of goods sold } & 150,000 \
\text { Dividend income (from 10-percent-owned domestic corporation) } & 35,000 \
\text { Interest income } & 10,000 \
\text { Business expenses (other than organizational costs and charitable } & 120,000 \
\text { contributions) } &  \
\text { Charitable contributions } & 5,000 \
 \text { Organizational costs expensed } &\underline{5,000} \
\text { Taxable income/(loss) } & \underline{\$}
\end{array}$

Accepted Answer

None

Question 17

The Cat Corporation had $20,000 of book income in the current year.The following is a list of differences between federal and book income and expenses: Federal income tax expense deducted for books
Depreciation deducted on books
Depreciation deducted on tax return
50 percent of meals expense not allowed as an expense for taxes
Charitable contributions carried over from prior years and deducted on the current year tax return
Current year taxable gain on an installment sale which was reported on the books in a previous ye Prepaid interest not deductible in the current year for tax purposes but claimed as a deduction for purposes
Nondeductible club dues Based on the above information, calculate the Cat Corporation's federal taxable income for the year.Show your calculations.

Accepted Answer

$29,100 = $20,000 +

Question 18

Corporations may be subject to the alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 19

During the current year, The Jupiter Company, which is an S corporation, had the following items of income and expenses:​ $\begin{array}{llcc}
  \text {Gross income from operations  } &\$137,000  \
 \text { Gain on sale of business assets } &5,000\
 \text {  Qualified dividend income from investments} &100\
 \text { Deductions: } &\
 \text {Salaries to employees  } &65,000\
 \text { Payroll taxes } &6,000\
 \text { Rent } &7,000\
\text { Depreciation }&3,500\
 \text { Contributions to United Way charity } &2,000\
 \text {Foreign tax paid on overseas business deals  } &3,000\
 \text {Distributions to the shareholders  } &40,000\
\end{array}$
 
a.Calculate the net ordinary income.
b.List all the other items which must be separately reported.
c.If the S corporation is on a calendar year, when is the corporation's tax return due?

Accepted Answer

a. 
c. Mar

Question 20

Terry forms the Camphor Corporation during the current year.She transfers property with a value of $700,000 to Camphor Corporation in exchange for 100 percent of the stock in the corporation.Terry's basis in the property transferred was $400,000 and the corporation assumed a $275,000 mortgage on the property.If the fair market value of the stock received by Terry is $425,000, what is the corporation's basis in the property received from Terry?

Accepted Answer

A) $125,000 
B) $275,000 
C) $400,000 
D) $450,000 
E) $700,000 
A) $125,000 
B) $275,000 
C) $400,000 
D) $450,000 
E) $700,000

The corporate tax rates favor large corporations.

Which of the following statements is not true of S corporations?

The accumulated earnings tax will not be imposed on accumulations that can be shown to be necessary to meet the reasonable needs of the business.

Capital losses of a corporation must be used to offset capital gains and net capital losses may not be deducted from the ordinary income of a corporation.

What is the maximum amount of accumulated earnings that a corporation is allowed to accumulate, without regard to business needs, before the accumulated earnings tax is imposed?

Corporations are not allowed to amortize the costs of organizing the corporation.

Which of the following is false in regards to filing requirements?

What is the purpose of Schedule M-1?

A corporation may carry forward capital losses for an indefinite period.

Corporations may be subject to the alternative minimum tax.

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income Part 1

Additional Income Part 2

Deductions and Adjustments to Income

Accounting Methods and Taxes

Tax Credits

Depreciation and Sale of Business Property

Payroll, Estimated Payments, and Retirement Plans

Partnership Taxation

Tax Administration and Tax Planning

Filters

Exam 11: The Corporate Income Tax

The corporate tax rates favor large corporations.

Which of the following statements is not true of S corporations?

The accumulated earnings tax will not be imposed on accumulations that can be shown to be necessary to meet the reasonable needs of the business.

Capital losses of a corporation must be used to offset capital gains and net capital losses may not be deducted from the ordinary income of a corporation.

What is the maximum amount of accumulated earnings that a corporation is allowed to accumulate, without regard to business needs, before the accumulated earnings tax is imposed?

Corporations are not allowed to amortize the costs of organizing the corporation.

Which of the following is false in regards to filing requirements?

What is the purpose of Schedule M-1?

A corporation may carry forward capital losses for an indefinite period.

Corporations may be subject to the alternative minimum tax.

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income Part 1

Additional Income Part 2

Deductions and Adjustments to Income

Accounting Methods and Taxes

Tax Credits

Depreciation and Sale of Business Property

Payroll, Estimated Payments, and Retirement Plans

Partnership Taxation

Tax Administration and Tax Planning

Filters