Exam 5: Other Corporate Tax Levies

Smartmoney,Inc.was formed by three wealthy dentists to pool their investment funds.They each invested $200,000 in the corporation,which was immediately used to purchase stocks to be held as investments.The first year,the corporation received dividends of $70,000 and filed a tax return paying a corporation tax in the amount of $3,150 [($70,000 dividends - $49,000 DRD)× .15 = $3,150].The IRS audits this corporation and sends a tax bill in the amount of $13,370 ($66,850 UPHCI × 0.20 = $13,370)plus underpayment penalty and interest.What is this additional tax and what should the dentists do about it? What action(s)do you recommend the corporation take for the tax year in question and subsequent tax years?

Lake Corporation is a personal holding company.Lake reports the following results for the current year: No dividends are paid during the current year or the 2-and-one-half-month throwback period.The mortgage relates to the rental properties.Calculate the adjusted income from rents exclusion from personal holding company income.

The personal holding company penalty tax rate is

Identify which of the following statements is true.

Eight individuals own Navy Corporation,a C corporation.Three shareholders make up the board of directors and own 51% of the stock.The corporation has a successful manufacturing business.It has accumulated $3 million of E&P and expects to accumulate another $200,000 of E&P annually.Annual dividend payments are $30,000.Demand for Navy's goods has been strong,but the company does not anticipate any expansion or repair of the current plant for three to five years.Management has invested $200,000 annually in growth stocks.Its current investment portfolio is $1.2 million.The portfolio is held as protection against a business slowdown.Loans to shareholder-employees currently are $400,000.As Navy's CPA,what tax issues should you have your client consider?

Drury Corporation,which was organized three years ago,reports the following adjusted current earnings (ACE)and preadjustment alternative minimum taxable income (AMTI)amounts. What is the ACE adjustment to increase (or decrease)taxable income to arrive at AMTI for the current year?

Identify which of the following statements is true.

Hydrangia Corporation reports the following results for the current year: What is Hydrangia Corporation's alternative minimum tax liability?

Identify which of the following statements is true.

Which of the following is not an adjustment in calculating AMTI?

Identify which of the following statements is true.

Identify which of the following statements is true.

How does the deduction for U.S.production activities affect AMTI?

Mountaineer,Inc.has the following results: What is the amount of the alternative minimum tax?

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is false.

The accumulated earnings tax is imposed at what rate?

Identify which of the following statements is true.

Raptor Corporation is a PHC for 2009 and reports $200,000 of taxable income on its federal income tax return. What is Raptor's PHC tax,assuming that it does not pay any dividends?