Exam 11: The Corporate Income Tax

ABC Company owns 40 percent of JMT Company and 95 percent of DEM Company. JMT pays an $80,000 dividend to ABC and DEM pays a $40,000 dividend to ABC in the current year. Assuming that ABC has $1,000,000 of taxable income, calculate ABC's dividends received deduction for the current year.

If a corporation's status as an S corporation is involuntarily terminated in the middle of the tax year, the corporation must file an S corporation tax return for the first half of the tax year and a regular corporation tax return for the second half of the tax year.

A corporation may carry forward capital losses for an indefinite period.

On July 1, 2016, Grey formed Arucaria Corporation. On that same date, Grey contributed $100,000 cash and transferred property with an adjusted basis of $60,000 to Arucaria in exchange for 3,000 shares of the corporation's common stock. The property transferred had a fair market value of $75,000 on the date of the transfer. Arucaria Corporation had no other shares of common stock outstanding on July 1, 2016. As a result of this transaction, Grey's basis in the stock and Arucaria Corporation's basis in the property (other than the cash), respectively, are:

Avocado Corporation paid $3,000 in estimated tax payments for the calendar year ended December 31, 2016. The corporation has an actual tax liability of $4,000 for the year. a.If no extension is requested, when is the tax return due? b.If an extension of time to file is requested and approved, when is the tax return due? c.If an extension of time to file is requested and approved, when is the additional $1,000 of the 2016 tax due?

The Cat Corporation had $20,000 of book income in the current year. The following is a list of differences between federal and book income and expenses: Based on the above information, calculate the Cat Corporation's federal taxable income for the year. Show your calculations.

The Lagerstroemia Corporation was formed on January 1, 2016. Calculate the Lagerstroemia Corporation's taxable income or loss for 2016 given the following information:

During the current year, the Melaleuca Corporation received dividends from 50-percent-owned domestic corporations in the amount of $100,000. a.​ ​ Assuming that in addition to the dividend income the corporation has gross income from operations of $250,000 and deductible operating expenses of $210,000, calculate the amount of the corporation's dividends received deduction for the current year. b.​ ​ If, instead of $250,000 in gross income from operations, the corporation has $200,000 in gross income from operations and the same amount of dividends and expenses, calculate the amount of the corporation's dividends received deduction for the current year.

Which of the following statements is true of corporations?

A regular corporation with excess charitable contributions may carry the excess forward to the 5 succeeding tax years.

As a general rule, the transfer of property by a sole shareholder to a corporation in exchange solely for stock does not result in a taxable transaction.

The F. Repens Corporation has taxable income of $250,000 for the current year, including dividends of $60,000 received from 30 percent-owned domestic corporations. How much is the F. Repens Corporation's dividends received deduction for the current year?

Brokers' fees incurred in the issuance of a corporation's stock are considered organizational expenditures.

The Great Gumball Corporation is a gumball producer. The corporation has accumulated earnings of $425,000 and it can establish a reasonable need for $360,000. Calculate the amount of the accumulated earnings tax, if any, that will be imposed on the corporation.

Corporations pay a flat 30 percent federal income tax.

Ficus, Inc. began business on March 1, 2016, and elected to file its income tax return on a calendar-year basis. The corporation incurred $800 in organizational expenditures. Assuming the corporation does not elect to expense but chooses to amortize the costs over 180 months, the maximum allowable deduction for amortization of organizational expenditures in 2016 is:

For its year ended December 31, 2016, Cupressa Corporation, an S corporation, had net income of $216,000 which included $180,000 of ordinary income from operations and a $36,000 net long-term capital gain. During 2016, a total of $90,000 was distributed to the corporation's nine equal shareholders, all of whom are on a calendar-year tax basis. For 2016, each shareholder should report:

What is the maximum amount of accumulated earnings that a corporation is allowed to accumulate, without regard to business needs, before the accumulated earnings tax is imposed?

The income of an S corporation is computed in much the same manner as that of a partnership.

During the current year, the Squamata Corporation, a regular C corporation, has $30,000 in ordinary income, a long-term capital loss of $20,000, and a short-term capital gain of $10,000. a.Calculate the Squamata Corporation's tax liability for the current year. b.​ Explain the nature and amount of any carrybacks or carryforwards that the corporation is entitled to use.