Exam 3: Corporations: Special Situations

May Corporation, a Miami contractor, pays Crane Engineering a fee to design bridges for a highway May will build in the Cayman Islands. The fee Crane receives is DPGR.

Passive activity losses of certain closely held corporations and personal service corporations are tax preferences.

Lemon, Inc., has taxable income of $15 million in 2011. What is the maximum DPAD tax savings for this C corporation?

Bacon Corporation manufactures an exercise machine at a cost of $800 and sells the machine to Kershaw Corporation for $1,000 in 2011. Kershaw incurs TV advertising expenses of $300 and sells the machine by phone order for $1,600. If Bacon and Kershaw corporations are members of an expanded affiliated group (EAG), their DPGR is:

In terms of the effect of DPAD, the maximum tax savings for a corporation with $11 million of taxable income is $346,500 in 2011.

Ecru Corporation sells customized outdoor grills. The company purchases various parts and materials from foreign sources for $750 and incurs $240 in labor costs at a factory in North Carolina to fabricate and assemble the product. Ecru also incurs packaging, selling, and other costs of $60 and sells the grill for $1,200. If tax year 2011 is involved, calculate Ecru's per unit:

Which of the following items will be an addition to AMTI in arriving at ACE?

Which statement is false?

In each of the following independent situations, calculate accumulated taxable income, if any. Assume the corporation is not a mere holding or investment company. Copper Corporation has $64,050 of accumulated taxable income and Bronze Corporation has $226,780 of accumulated taxable income:

What are some of the differences (at least three) between the application of the AMT for individuals and corporations?

Junco Corporation is a member of an expanded affiliated group (EAG) and has QPAI but no W-2 wages. Junco cannot claim a DPAD.

DPGR - Allowable Indirect Costs = QPAI. Is this formula correct?

Intangible drilling costs are a tax preference item only for integrated oil companies.

The penalty tax in 2011 for AET and PHC situations is the highest rate applicable to individual taxpayers.

The ACE adjustment can be positive or negative.

Under some circumstances, the sale of prepared food at a taxpayer's retail facility can qualify as DPGR.

Tanweer, Inc., manufactures and sells glassware. The company also sells dinnerware that is purchased from unrelated foreign producers. During tax year 2011, Tanweer had a U.S. profit of $1.2 million (QPAI) and a loss from the imported dinnerware of $200,000. What is Tanweer's DPAD?

Martin, a real estate developer, pays Alan, a general contractor, to construct a housing project. Alan has no DPGR since he does not own the property.

As taxable income is reduced by an NOL carryback, there is a corresponding increase in the DPAD.

The AMT exemption amount of $40,000 phases out entirely once a corporation's average gross receipts exceeds $5 million.