Exam 3: Corporations: Special Situations

Emerald, Inc. engages in production activities that generate QPAI of $560,000 and taxable income (without taking into account the DPAD and NOL) of $700,000 in 2011. The company also has an NOL carryover to 2011 of $600,000 and qualified W-2 wages of $350,000. Calculate any DPAD.

The definition of an expanded affiliated group (EAG) for DPAD purposes is broader than that applicable to the filing of consolidated tax returns.

Boasso Corporation manufactures an exercise machine at a cost of $800 and sells the machine to Kirby Corporation for $1,000 in 2011. Kirby incurs TV advertising expenses of $300 and sells the machine by phone order for $1,700. If Boasso and Kirby corporations are members of an expanded affiliated group (EAG), their QPAI is:

A company with a NOL carryforward for a tax year is ineligible for the DPAD if the carryforward eliminates current income.

Robin Corporation, a calendar year taxpayer, manufactures and sells candles. It has several factories in the U.S. and one in Jamaica. During 2011, it had DPGR of $4.1 million from the U.S. factories.

Red Company, a U.S. corporation based in Mississippi, manufactures and sells a product which includes some components made in Mexico. None of Red's income from sales constitute DPGR.

Which statement is false?

Which entity is subject to the ACE provisions?

In connection with the construction of a housing project, a contractor pays an architect to design the homes being built. The architect's fee is an embedded service that qualifies as DPGR.

With respect to the AMT, what is the minimum tax credit?

How is DPAD handled in an S corporation or a partnership situation?