Exam 5: Other Corporate Tax Levies

Identify which of the following statements is true.

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?

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?

When using the Bardahl formula,an increase in accounts payable (while holding purchases and operating expenses constant)has which of the following effects on the working capital requirements?

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

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

Which of the following items are adjustments made to arrive at alternative minimum taxable income?

Rich Company sold equipment this year for $50,000.The equipment had been depreciated using 200% declining balance.Accumulated depreciation totals $60,000 for regular tax purposes and $70,000 for AMTI.The equipment originally cost $90,000.What AMT issues does this sale present?

Which of the following items are tax preference items for purposes of arriving at alternative minimum taxable income?

Explain the carryover provisions of the minimum tax credit.

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?

Given the following information about Jones Corporation,what are Jones's working capital needs using the Bardahl formula,assuming that federal income taxes are not an operating expense?

Identify which of the following statements is true.

The accumulated earnings tax does not apply to corporations that

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

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?

Define personal holding company income.

How is the accumulated earnings tax liability computed?

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

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