Question 1

Which of the following statements regarding the minimum tax credit is correct?

Accepted Answer

A) It can only be carried forward. 
B) It must be carried back before being carried forward. 
C) Taxpayers may elect to forgo the carryback period and carry the credit forward. 
D) There are not carryforwards or carrybacks of the minimum tax credit. 
A) It can only be carried forward. 
B) It must be carried back before being carried forward. 
C) Taxpayers may elect to forgo the carryback period and carry the credit forward. 
D) There are not carryforwards or carrybacks of the minimum tax credit.

Question 2

The alternative minimum tax is the excess of the tentative minimum tax amount over the regular tax amount.

Accepted Answer

A) True 
 B)False

Question 3

Identify which of the following statements is true.

Accepted Answer

A) A corporation accumulates earnings to fund the redemption of a shareholder's stock following her death so as to provide her estate with liquidity to pay death taxes.Such an accumulation of earnings is a reasonable business need. 
B) A corporation accumulates earnings to fund a buy-sell agreement.Such an accumulation of earnings is a reasonable business need. 
C) A corporation's net capital gain (minus any federal income taxes paid with respect to such gain)increases the tax base for the accumulated earnings tax. 
D) All of the above are false. 
A) A corporation accumulates earnings to fund the redemption of a shareholder's stock following her death so as to provide her estate with liquidity to pay death taxes.Such an accumulation of earnings is a reasonable business need. 
B) A corporation accumulates earnings to fund a buy-sell agreement.Such an accumulation of earnings is a reasonable business need. 
C) A corporation's net capital gain (minus any federal income taxes paid with respect to such gain)increases the tax base for the accumulated earnings tax. 
D) All of the above are false.

Question 4

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

Accepted Answer

A) $500,000 
B) $360,000 
C) $460,000 
D) none of the above 
A) $500,000 
B) $360,000 
C) $460,000 
D) none of the above

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Identify which of the following statements is false.

Accepted Answer

A) Tax-exempt interest on certain private activity bonds may be taxed under the alternative minimum tax. 
B) Tax preference items and adjustments may either increase or decrease taxable income to obtain AMTI. 
C) Depending on the date an asset is placed in service,depreciation may be an adjustment to taxable income or a tax preference item for alternative minimum tax purposes. 
D) Different depreciation rules are used when computing taxable income and alternative minimum taxable income. 
A) Tax-exempt interest on certain private activity bonds may be taxed under the alternative minimum tax. 
B) Tax preference items and adjustments may either increase or decrease taxable income to obtain AMTI. 
C) Depending on the date an asset is placed in service,depreciation may be an adjustment to taxable income or a tax preference item for alternative minimum tax purposes. 
D) Different depreciation rules are used when computing taxable income and alternative minimum taxable income.

Question 7

In determining accumulated taxable income for the purpose of the accumulated earnings tax,which one of the following is allowed as a deduction?

Accepted Answer

A) excess charitable contributions 
B) dividends-received deduction 
C) net operating loss deduction 
D) net capital loss for the current year 
A) excess charitable contributions 
B) dividends-received deduction 
C) net operating loss deduction 
D) net capital loss for the current year

Question 8

Beta Corporation incurs an $80,000 regular tax liability and a $20,000 AMT liability.Assuming no restrictions on Beta's ability to use the minimum tax credit,what journal entry would be necessary to record tax expense?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 9

The general business credit can be used to offset the alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 10

Tax-exempt interest income on state and local municipal bonds that are not a private activity is

Accepted Answer

A) a tax preference item. 
B) a positive adjustment in calculating alternative minimum taxable income (AMTI). 
C) a negative adjustment in calculating alternative minimum taxable income (AMTI). 
D) included in calculating ACE (adjusted current earnings). 
A) a tax preference item. 
B) a positive adjustment in calculating alternative minimum taxable income (AMTI). 
C) a negative adjustment in calculating alternative minimum taxable income (AMTI). 
D) included in calculating ACE (adjusted current earnings).

Question 11

When computing the accumulated earnings tax,the dividends-paid deduction is not available for

Accepted Answer

A) dividends paid during the tax year. 
B) throwback dividends. 
C) stock dividends. 
D) All of the above are deductible. 
A) dividends paid during the tax year. 
B) throwback dividends. 
C) stock dividends. 
D) All of the above are deductible.

Question 12

What are the four general rules that provide a framework for the ACE calculation?

Accepted Answer

Any amount that is permanently excluded

Question 13

Which of the following statements about the alternative minimum tax depreciation rules is correct?

Accepted Answer

A) The MACRS depreciation rules are used to calculate the depreciation deduction when calculating alternative minimum taxable income regardless of the date the property was placed in service. 
B) The excess of the gain reported on the disposition of tangible personal property for income tax purposes over the gain reported for alternative minimum tax purposes is a positive adjustment to taxable income in arriving at alternative minimum taxable income. 
C) A 31.5-year recovery period is used when calculating the commercial real property depreciation deduction for alternative minimum taxable income purposes. 
D) No depreciation adjustment is made when computing AMT for real property acquired after 1998. 
A) The MACRS depreciation rules are used to calculate the depreciation deduction when calculating alternative minimum taxable income regardless of the date the property was placed in service. 
B) The excess of the gain reported on the disposition of tangible personal property for income tax purposes over the gain reported for alternative minimum tax purposes is a positive adjustment to taxable income in arriving at alternative minimum taxable income. 
C) A 31.5-year recovery period is used when calculating the commercial real property depreciation deduction for alternative minimum taxable income purposes. 
D) No depreciation adjustment is made when computing AMT for real property acquired after 1998.

Question 14

Identify which of the following statements is false.

Accepted Answer

A) Askew Corporation has ten unrelated shareholders,each of whom owns 10% of the outstanding stock.This corporation is a personal holding company. 
B) Stock owned by an individual,in addition to stock attributed from her spouse,parents,children,and siblings,are all counted towards whether or not the personal holding company stock ownership test has been met. 
C) S corporations and tax-exempt organizations are excluded from the personal holding company (PH
C) definition. 
D) A person who holds an option to acquire stock is considered to own the stock for purposes of the PHC stock requirements. 
A) Askew Corporation has ten unrelated shareholders,each of whom owns 10% of the outstanding stock.This corporation is a personal holding company. 
B) Stock owned by an individual,in addition to stock attributed from her spouse,parents,children,and siblings,are all counted towards whether or not the personal holding company stock ownership test has been met. 
C) S corporations and tax-exempt organizations are excluded from the personal holding company (PH
C) definition. 
D) A person who holds an option to acquire stock is considered to own the stock for purposes of the PHC stock requirements.

Question 15

When computing a corporation's alternative minimum taxable income,its taxable income is

Accepted Answer

A) only increased (never decreased)by tax preference items. 
B) only increased (never decreased)by adjustments. 
C) increased by the statutory exemption of $40,000. 
D) increased by 75% of the excess of adjusted current earnings over taxable income. 
A) only increased (never decreased)by tax preference items. 
B) only increased (never decreased)by adjustments. 
C) increased by the statutory exemption of $40,000. 
D) increased by 75% of the excess of adjusted current earnings over taxable income.

Question 16

Door Corporation's alternative minimum taxable income before the statutory exemption is $200,000.What is Door's tentative minimum tax before credits?

Accepted Answer

The answer of Door Corporation's alternative minimum taxable income before...

Question 17

Identify which of the following statements is false.

Accepted Answer

A) The corporate AMT produces relatively little tax revenue. 
B) The small corporation AMT exemption exempts 95% of all corporations from the AMT. 
C) The corporate AMT is similar to the AMT for individuals. 
D) The starting point for computing a corporation's AMT is book income. 
A) The corporate AMT produces relatively little tax revenue. 
B) The small corporation AMT exemption exempts 95% of all corporations from the AMT. 
C) The corporate AMT is similar to the AMT for individuals. 
D) The starting point for computing a corporation's AMT is book income.

Question 18

Define personal holding company income.

Accepted Answer

Personal holding company income includes

Question 19

When computing the accumulated earnings tax,which of the following is not a reduction to arrive at accumulated taxable income?

Accepted Answer

A) accumulated earnings credit 
B) NOL deduction claimed 
C) accrued federal income taxes 
D) dividends-paid deduction 
A) accumulated earnings credit 
B) NOL deduction claimed 
C) accrued federal income taxes 
D) dividends-paid deduction

Question 20

Lawrence Corporation reports the following results during the current year:
   No dividends were paid in the throwback period.A long-term capital gain of $50,000 is included in taxable income.The statutory accumulated earnings tax exemption has been used up in prior years.An additional earnings accumulation of $60,000 for the current year can be justified as meeting the reasonable needs of the business.What is Lawrence Corporation's accumulated earnings tax liability?

Accepted Answer

@#IMG-DLM& 
*$60,000 reasonable needs of

Exam 5: Other Corporate Tax Levies

Which of the following statements regarding the minimum tax credit is correct?

The alternative minimum tax is the excess of the tentative minimum tax amount over the regular tax amount.

Identify which of the following statements is true.

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

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

Identify which of the following statements is false.

In determining accumulated taxable income for the purpose of the accumulated earnings tax,which one of the following is allowed as a deduction?

Beta Corporation incurs an $80,000 regular tax liability and a $20,000 AMT liability.Assuming no restrictions on Beta's ability to use the minimum tax credit,what journal entry would be necessary to record tax expense?

The general business credit can be used to offset the alternative minimum tax.

Tax-exempt interest income on state and local municipal bonds that are not a private activity is

When computing the accumulated earnings tax,the dividends-paid deduction is not available for

What are the four general rules that provide a framework for the ACE calculation?

Which of the following statements about the alternative minimum tax depreciation rules is correct?

Identify which of the following statements is false.

When computing a corporation's alternative minimum taxable income,its taxable income is

Door Corporation's alternative minimum taxable income before the statutory exemption is $200,000.What is Door's tentative minimum tax before credits?

Identify which of the following statements is false.

Define personal holding company income.

When computing the accumulated earnings tax,which of the following is not a reduction to arrive at accumulated taxable income?

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