Question 1

All of the following are recognized as reasons for accumulating earnings except

Accepted Answer

A) working capital needs. 
B) product liability loss reserves. 
C) redemption of stock of deceased shareholder. 
D) All of the above are recognized reasons for accumulating earnings. 
A) working capital needs. 
B) product liability loss reserves. 
C) redemption of stock of deceased shareholder. 
D) All of the above are recognized reasons for accumulating earnings.

Question 2

In the last three years,Wolf Corporation had gross receipts of $3,000,000,$5,000,000,and $10,000,000.Which of the following statements is correct?

Accepted Answer

A) Wolf receives a statutory exemption of $40,000 based on its receipts. 
B) Wolf is exempt from the AMT. 
C) Wolf is subject to the AMT in the current year. 
D) There is insufficient information to determine whether Wolf is subject to the AMT. 
A) Wolf receives a statutory exemption of $40,000 based on its receipts. 
B) Wolf is exempt from the AMT. 
C) Wolf is subject to the AMT in the current year. 
D) There is insufficient information to determine whether Wolf is subject to the AMT.

Question 3

Certain adjustments must be made to alternative minimum taxable income (AMTI)to arrive at adjusted current earnings (ACE).Which one of the following adjustments increases AMTI to arrive at ACE?

Accepted Answer

A) federal income taxes paid 
B) the 80% dividends-received deduction 
C) gain realized on the installment sale of noninventory property 
D) excess of capital losses over capital gains 
A) federal income taxes paid 
B) the 80% dividends-received deduction 
C) gain realized on the installment sale of noninventory property 
D) excess of capital losses over capital gains

Question 4

Identify which of the following statements is true.

Accepted Answer

A) The personal holding company tax is levied to prevent closely held corporations from sheltering passive income. 
B) Caleb Corporation is owned by a mother and her two daughters.It reports $100,000 of rental income,$30,000 of depreciation,interest,and property taxes on the rental real estate,and $10,000 of dividend income.Caleb Corporation is classified as a personal holding company. 
C) Luke Corporation is owned by a father and his son.The corporation employs 10 individuals to provide public accounting services.Father and son make all of the work assignments for the professional employees.The professional fees earned by the corporation are personal holding company income. 
D) All of the above are false. 
A) The personal holding company tax is levied to prevent closely held corporations from sheltering passive income. 
B) Caleb Corporation is owned by a mother and her two daughters.It reports $100,000 of rental income,$30,000 of depreciation,interest,and property taxes on the rental real estate,and $10,000 of dividend income.Caleb Corporation is classified as a personal holding company. 
C) Luke Corporation is owned by a father and his son.The corporation employs 10 individuals to provide public accounting services.Father and son make all of the work assignments for the professional employees.The professional fees earned by the corporation are personal holding company income. 
D) All of the above are false.

Question 5

The NOL deduction is calculated the same for regular and alternative minimum tax purposes.

Accepted Answer

A) True 
 B)False

Question 6

The courts and the Treasury Regulations have mentioned a number of reasonable needs that allow a corporation to accrue earnings and avoid the accumulated earnings tax.What are these reasons?

Accepted Answer

• Expansion of a business or replacement

Question 7

The Small C corporation exemption from AMT continues as long as average gross receipts for the three preceding tax years are

Accepted Answer

A) $6.5 million or less. 
B) $7.0 million or less. 
C) $7.5 million or less. 
D) $8.0 million or less. 
A) $6.5 million or less. 
B) $7.0 million or less. 
C) $7.5 million or less. 
D) $8.0 million or less.

Question 8

Identify which of the following statements is true.

Accepted Answer

A) A deficiency dividend is included in the shareholder's gross income for his/her tax year that includes the last day of the tax year in which the personal holding company claims a dividends-paid deduction. 
B) A shareholder who receives a deficiency dividend must report the dividend as gross income for the tax year that includes the last day of the distributing corporation's tax year on which it was a PHC. 
C) A personal holding company's payment of a deficiency dividend eliminates its need to pay the personal holding company tax as well as any interest and underpayment penalties on the tax deficiency. 
D) All of the above are false. 
A) A deficiency dividend is included in the shareholder's gross income for his/her tax year that includes the last day of the tax year in which the personal holding company claims a dividends-paid deduction. 
B) A shareholder who receives a deficiency dividend must report the dividend as gross income for the tax year that includes the last day of the distributing corporation's tax year on which it was a PHC. 
C) A personal holding company's payment of a deficiency dividend eliminates its need to pay the personal holding company tax as well as any interest and underpayment penalties on the tax deficiency. 
D) All of the above are false.

Question 9

Investors Corporation has ten unrelated individual shareholders who each own 10% of the outstanding stock.For their tax year ended December 31 of this year,Investors' gross income includes:
   No dividends are paid during the tax year or during the 2-1/2 month throwback period.Deductible administrative expenses total $4,000 for the year.Rental income has been reduced by $1,000 of depreciation and $2,000 of interest expense.What is Investors' undistributed personal holding company income?

Accepted Answer

Investors is not a personal ho

Question 10

Which of the following is not an adjustment to taxable income when computing the personal holding company tax?

Accepted Answer

A) dividends-received deduction 
B) dividends-paid deduction 
C) NOL carryover from immediately preceding tax year 
D) All of the above are adjustments. 
A) dividends-received deduction 
B) dividends-paid deduction 
C) NOL carryover from immediately preceding tax year 
D) All of the above are adjustments.

Question 11

Corporations cannot use the installment method in calculating alternative minimum taxable income (AMTI)for noninventory items.

Accepted Answer

A) True 
 B)False

Question 12

In the current year,Sun Corporation's federal income taxes before credits are $220,000.Its TMT is $100,000.Their only available credit is a research credit (part of the general business credit)of $160,000.The general business credit is limited to what amount?

Accepted Answer

The lesser of: (a)$160,000 tentative gen

Question 13

Which of the following actions cannot be used to eliminate a possible personal holding company tax liability involving a corporation owned by a mother and a father?

Accepted Answer

A) Sell additional stock to other family members. 
B) Make a cash distribution within 2 1/2 months of the end of the tax year. 
C) Make a deficiency distribution within 90 days of the date on which the IRS determines that a personal holding company liability is owed. 
D) Liquidate the corporation. 
A) Sell additional stock to other family members. 
B) Make a cash distribution within 2 1/2 months of the end of the tax year. 
C) Make a deficiency distribution within 90 days of the date on which the IRS determines that a personal holding company liability is owed. 
D) Liquidate the corporation.

Question 14

Foster Corporation has gross income for regular tax purposes of $100,000,which includes a net Sec.1231 gain of $10,000 and a net capital gain of $10,000.Ordinary gross income for personal holding company purposes is

Accepted Answer

A) $70,000. 
B) $80,000. 
C) $90,000. 
D) $100,000. 
A) $70,000. 
B) $80,000. 
C) $90,000. 
D) $100,000.

Question 15

Eagle Corporation,a personal holding company,has the following results:
   Calculate the PHC tax.

Accepted Answer

@#IMG-DLM& 
*$10,000

Question 16

A personal holding company cannot take a dividends-paid deduction for

Accepted Answer

A) throwback dividends. 
B) consent dividends. 
C) deficiency dividends. 
D) preferential dividends. 
A) throwback dividends. 
B) consent dividends. 
C) deficiency dividends. 
D) preferential dividends.

Question 17

Identify which of the following statements is true.

Accepted Answer

A) The Bardahl formula is based on the firm's inventory period,receivables period,credit period,and total cash expenditures for cost of sales and operating expenses. 
B) The Bardahl formula uses the concept of working capital,cash over current liabilities. 
C) The Bardahl formula provides mathematical exactness when calculating reasonable working capital needs for accumulated earnings tax purposes. 
D) All of the above are false. 
A) The Bardahl formula is based on the firm's inventory period,receivables period,credit period,and total cash expenditures for cost of sales and operating expenses. 
B) The Bardahl formula uses the concept of working capital,cash over current liabilities. 
C) The Bardahl formula provides mathematical exactness when calculating reasonable working capital needs for accumulated earnings tax purposes. 
D) All of the above are false.

Question 18

What is a personal holding company?

Accepted Answer

A personal holding company is any corpor

Question 19

Green Corporation,a closely held operating corporation,reports the following:
   Calculate Green's accumulated taxable income.

Accepted Answer

@#IMG-DLM& 
*$30,000 *.39% =$1

Question 20

The personal holding company tax might be imposed

Accepted Answer

A) on both partnerships and corporations. 
B) on companies whose gross income arises solely from rentals,if the lessors render no services to the lessees. 
C) if more than 50% of the company is owned by five or fewer individuals for the entire year. 
D) on small business investment companies licensed by the Small Business Administration. 
A) on both partnerships and corporations. 
B) on companies whose gross income arises solely from rentals,if the lessors render no services to the lessees. 
C) if more than 50% of the company is owned by five or fewer individuals for the entire year. 
D) on small business investment companies licensed by the Small Business Administration.

Exam 5: Other Corporate Tax Levies

All of the following are recognized as reasons for accumulating earnings except

In the last three years,Wolf Corporation had gross receipts of $3,000,000,$5,000,000,and $10,000,000.Which of the following statements is correct?

Certain adjustments must be made to alternative minimum taxable income (AMTI)to arrive at adjusted current earnings (ACE).Which one of the following adjustments increases AMTI to arrive at ACE?

Identify which of the following statements is true.

The NOL deduction is calculated the same for regular and alternative minimum tax purposes.

The courts and the Treasury Regulations have mentioned a number of reasonable needs that allow a corporation to accrue earnings and avoid the accumulated earnings tax.What are these reasons?

The Small C corporation exemption from AMT continues as long as average gross receipts for the three preceding tax years are

Identify which of the following statements is true.

Which of the following is not an adjustment to taxable income when computing the personal holding company tax?

Corporations cannot use the installment method in calculating alternative minimum taxable income (AMTI)for noninventory items.

In the current year,Sun Corporation's federal income taxes before credits are $220,000.Its TMT is $100,000.Their only available credit is a research credit (part of the general business credit)of $160,000.The general business credit is limited to what amount?

Which of the following actions cannot be used to eliminate a possible personal holding company tax liability involving a corporation owned by a mother and a father?

Foster Corporation has gross income for regular tax purposes of $100,000,which includes a net Sec.1231 gain of $10,000 and a net capital gain of $10,000.Ordinary gross income for personal holding company purposes is

Eagle Corporation,a personal holding company,has the following results: Calculate the PHC tax.

A personal holding company cannot take a dividends-paid deduction for

Identify which of the following statements is true.

What is a personal holding company?

Green Corporation,a closely held operating corporation,reports the following: Calculate Green's accumulated taxable income.

The personal holding company tax might be imposed

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