Question 1

Which of the following statements is not true of S corporations?

Accepted Answer

A) S corporations are corporations that receive tax treatment similar to that given partnerships. 
B) Section 1231 gains and losses pass through separately to stockholders of an S corporation. 
C) The amount of S corporation losses that a shareholder of an S corporation may report on his or her tax return is limited to the basis of the stock plus any loans made by the shareholder to the corporation. 
D) If a taxpayer purchases stock in an S corporation from another shareholder during the year, the new shareholder may report the entire amount of any loss for the year attributable to the shares purchased. 
E) If a shareholder acquires 40 percent of the stock of an S corporation, the new shareholder cannot cause the corporation to lose its S corporation election. 
A) S corporations are corporations that receive tax treatment similar to that given partnerships. 
B) Section 1231 gains and losses pass through separately to stockholders of an S corporation. 
C) The amount of S corporation losses that a shareholder of an S corporation may report on his or her tax return is limited to the basis of the stock plus any loans made by the shareholder to the corporation. 
D) If a taxpayer purchases stock in an S corporation from another shareholder during the year, the new shareholder may report the entire amount of any loss for the year attributable to the shares purchased. 
E) If a shareholder acquires 40 percent of the stock of an S corporation, the new shareholder cannot cause the corporation to lose its S corporation election.

Question 2

The Sapote Corporation is a manufacturing corporation. The corporation has accumulated earnings of $450,000 and the corporation cannot establish a reasonable business need for any of that amount. What is the amount of the accumulated earnings tax, if any, that will be imposed on the corporation?

Accepted Answer

A) $45,000 
B) $30,000 
C) $50,000 
D) $76,000 
E) None of the above 
A) $45,000 
B) $30,000 
C) $50,000 
D) $76,000 
E) None of the above

Question 3

Which of the following is not an adjustment or tax preference item for the corporate alternative minimum tax?

Accepted Answer

A) Certain tax-exempt bond intererest 
B) Organization cost amortization 
C) Accelerated depreciation on personal property 
D) Percentage depletion in excess of the property's adjusted basis 
A) Certain tax-exempt bond intererest 
B) Organization cost amortization 
C) Accelerated depreciation on personal property 
D) Percentage depletion in excess of the property's adjusted basis

Question 4

Fran, George, and Helen form FGH Corporation. In exchange for 300 shares of stock of the corporation, Fran contributes property with a basis of $15,000, fair market value of $50,000 and subject to a liability of $20,000 which the corporation assumed. George contributes property with a basis of $20,000, fair market value of $30,000 in exchange for 250 shares of stock of the corporation with a value of $25,000 plus $5,000 cash. Helen performs services for the corporation and receives $2,000 worth of stock (20 shares) in exchange for the services.
a.What is the amount of Fran's recognized gain or loss on the transaction?
b.What is Fran's basis in the stock of the corporation?
c.What is the corporation's basis in the property received from Fran?
d.What is the amount of George's recognized gain or loss on the transaction?
e.What is George's basis in the stock of the corporation?

Accepted Answer

The answer of Fran, George, and Helen form FGH Corporation....

Question 5

The accumulated earnings tax, which is imposed on corporations for the accumulation of earnings in excess of reasonable business needs, does not apply to:

Accepted Answer

A) Closely-held corporations. 
B) Widely-held corporations. 
C) Corporations subject to the personal holding company tax. 
D) Both b.and c. 
E) All of the above. 
A) Closely-held corporations. 
B) Widely-held corporations. 
C) Corporations subject to the personal holding company tax. 
D) Both b.and c. 
E) All of the above.

Question 6

Which of the following corporations is allowed to make an S corporation election?

Accepted Answer

A) A U.S.corporation owned and operated by two U.S.citizens (individuals). 
B) A U.S.corporation owned by a Brazilian corporation. 
C) A U.S.owned and operated corporation with 7,000 separate shareholders. 
D) None of the above could be an S corporation. 
A) A U.S.corporation owned and operated by two U.S.citizens (individuals). 
B) A U.S.corporation owned by a Brazilian corporation. 
C) A U.S.owned and operated corporation with 7,000 separate shareholders. 
D) None of the above could be an S corporation.

Question 7

Corporations are not allowed to amortize the costs of organizing the corporation.

Accepted Answer

A) True 
 B)False

Question 8

Choose the correct statement:

Accepted Answer

A) The corporate alternative minimum tax applies to all corporations including S corporations. 
B) The exemption amount is phased out at a rate of $1.00 for every $1.00 by which the corporation's alternative minimum taxable base exceeds $210,000. 
C) The alternative minimum tax is imposed at 26 percent on the alternative minimum tax base up to $150,000 and 28 percent on the AMT base that is greater than $150,000. 
D) The alternative minimum tax base is equal to the corporation's regular taxable income increased or decreased for certain adjustments, increased by tax preference items, and decreased by the exemption amount. 
A) The corporate alternative minimum tax applies to all corporations including S corporations. 
B) The exemption amount is phased out at a rate of $1.00 for every $1.00 by which the corporation's alternative minimum taxable base exceeds $210,000. 
C) The alternative minimum tax is imposed at 26 percent on the alternative minimum tax base up to $150,000 and 28 percent on the AMT base that is greater than $150,000. 
D) The alternative minimum tax base is equal to the corporation's regular taxable income increased or decreased for certain adjustments, increased by tax preference items, and decreased by the exemption amount.

Question 9

The Peach Corporation is a regular corporation that contributes $25,000 cash to qualified charitable organizations during the current year. The corporation has net taxable income of $190,000 before deducting the contributions.
a.​
What is the amount of Peach Corporation's allowable deduction for charitable contributions for the current year?
b.What may the corporation do with any excess amount of contributions?

Accepted Answer

The answer of The Peach Corporation is a regular corporation...

Question 10

A corporation may be subject to both the accumulated earnings tax and the personal holding company tax in the same year.

Accepted Answer

A) True 
 B)False

Question 11

An S corporation files a Form 1120S.

Accepted Answer

A) True 
 B)False

Question 12

The corporate tax rates favor large corporations.

Accepted Answer

A) True 
 B)False

Question 13

The Guava Corporation has book net income of $90,000 for the current year. Included in this figure are the following items which are reported on the corporation's Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return.
1. Federal income tax expense $25,000
2. Depreciation deducted on books, not deductible for tax purposes 4,000
3. Deduction for 50 percent of meals and entertainment expense not allowed for tax purposes 3,000
4. Deduction for payroll tax penalties not allowed for tax purposes 2,000
5. Tax exempt interest income included in book income but not in tax return income 12,000
Based on the above information, calculate the Guava Corporation's taxable income for the year. Show your calculations.

Accepted Answer

$112,000 = $90,000 +

Question 14

Rob, Bill, and Steve form Big Company. Rob performs $45,000 of services for his shares of the company. Bill transferred property with a basis of $5,000 for $75,000 of stock. Steve contributes cash of $100,000 for his shares. Which of the three must recognize income in the year of the formation?

Accepted Answer

A) Rob 
B) Rob, Bill 
C) Bill 
D) Steve, Bill 
E) Steve, Rob 
A) Rob 
B) Rob, Bill 
C) Bill 
D) Steve, Bill 
E) Steve, Rob

Question 15

If a corporation is unable to deduct a capital loss against capital gains for a particular tax year, it loses the tax benefit since the loss may not be carried to other tax years.

Accepted Answer

A) True 
 B)False

Question 16

The corporate alternative minimum tax rate is 28 percent.

Accepted Answer

A) True 
 B)False

Question 17

A corporation may elect to take a credit for dividends paid in lieu of claiming a dividends received deduction.

Accepted Answer

A) True 
 B)False

Question 18

S corporations pay taxes at a higher rate than do regular corporations.

Accepted Answer

A) True 
 B)False

Question 19

For the year ended June 30, 2016, the Rosaceae Corporation, a regular C corporation, has a long-term capital loss of $25,000.
a.​
Assuming that in addition to the capital loss, the corporation has taxable income, before capital gains and losses, of $25,000 for 2016, calculate the corporation's tax liability before any credits.
b.​
​
Assuming that in addition to the long-term capital loss of $25,000 the corporation has taxable income, before capital gains and losses, of $90,000 and a short-term capital gain of $10,000 for 2016, calculate the corporation's tax liability before any credits.

Accepted Answer

The answer of For the year ended June 30, 2016,...

Question 20

Roberta and Sally formed the Alder Corporation on October 1, 2016. On the same date, Roberta paid $75,000 cash to Alder Corporation for 1,500 shares of the corporation's common stock. Simultaneously, Sally received 100 shares of Alder Corporation's stock for services rendered. How much should Sally include in her taxable income for 2016, and what will be the basis of her Alder Corporation stock? ​
Taxable Income Basis of Stock

Accepted Answer

A) ​ ​
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B) ​ ​
  ​ 
C) ​ ​
  ​ 
D) ​ ​
  ​ 
E) None of the above 
A) ​ ​
  ​ 
B) ​ ​
  ​ 
C) ​ ​
  ​ 
D) ​ ​
  ​ 
E) None of the above

Which of the following statements is not true of S corporations?

The Sapote Corporation is a manufacturing corporation. The corporation has accumulated earnings of $450,000 and the corporation cannot establish a reasonable business need for any of that amount. What is the amount of the accumulated earnings tax, if any, that will be imposed on the corporation?

Which of the following is not an adjustment or tax preference item for the corporate alternative minimum tax?

The accumulated earnings tax, which is imposed on corporations for the accumulation of earnings in excess of reasonable business needs, does not apply to:

Which of the following corporations is allowed to make an S corporation election?

Corporations are not allowed to amortize the costs of organizing the corporation.

Choose the correct statement:

A corporation may be subject to both the accumulated earnings tax and the personal holding company tax in the same year.

An S corporation files a Form 1120S.

The corporate tax rates favor large corporations.

Rob, Bill, and Steve form Big Company. Rob performs $45,000 of services for his shares of the company. Bill transferred property with a basis of $5,000 for $75,000 of stock. Steve contributes cash of $100,000 for his shares. Which of the three must recognize income in the year of the formation?

If a corporation is unable to deduct a capital loss against capital gains for a particular tax year, it loses the tax benefit since the loss may not be carried to other tax years.

The corporate alternative minimum tax rate is 28 percent.

A corporation may elect to take a credit for dividends paid in lieu of claiming a dividends received deduction.

S corporations pay taxes at a higher rate than do regular corporations.

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses Part I

Business Income and Expenses Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding Estimated Payments and Payroll Taxes

Partnership Taxation

Tax Administration and Tax Planning

Filters

Exam 11: The Corporate Income Tax

Which of the following statements is not true of S corporations?

The Sapote Corporation is a manufacturing corporation. The corporation has accumulated earnings of $450,000 and the corporation cannot establish a reasonable business need for any of that amount. What is the amount of the accumulated earnings tax, if any, that will be imposed on the corporation?

Which of the following is not an adjustment or tax preference item for the corporate alternative minimum tax?

The accumulated earnings tax, which is imposed on corporations for the accumulation of earnings in excess of reasonable business needs, does not apply to:

Which of the following corporations is allowed to make an S corporation election?

Corporations are not allowed to amortize the costs of organizing the corporation.

Choose the correct statement:

A corporation may be subject to both the accumulated earnings tax and the personal holding company tax in the same year.

An S corporation files a Form 1120S.

The corporate tax rates favor large corporations.

Rob, Bill, and Steve form Big Company. Rob performs $45,000 of services for his shares of the company. Bill transferred property with a basis of $5,000 for $75,000 of stock. Steve contributes cash of $100,000 for his shares. Which of the three must recognize income in the year of the formation?

If a corporation is unable to deduct a capital loss against capital gains for a particular tax year, it loses the tax benefit since the loss may not be carried to other tax years.

The corporate alternative minimum tax rate is 28 percent.

A corporation may elect to take a credit for dividends paid in lieu of claiming a dividends received deduction.

S corporations pay taxes at a higher rate than do regular corporations.

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses Part I

Business Income and Expenses Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding Estimated Payments and Payroll Taxes

Partnership Taxation

Tax Administration and Tax Planning

Filters