Exam 11: The Corporate Income Tax

A corporation must reconcile, to the IRS's satisfaction, the differences between net income as shown on the company's books and taxable income (before special deductions and net operating losses) as shown on the tax return.

On July 1, of the current year, Robert forms the Yew Corporation. In exchange for 100 percent of the corporation's stock, Robert contributes land with a fair market value of $100,000. Robert acquired the land 5 years ago at a cost of $30,000. At the date of the contribution, the land is subject to a $10,000 mortgage which the corporation assumes. What is the basis of the land to Yew Corporation?

If the shareholders of an S corporation voluntarily revoke the corporation's S corporation status in the sixth month of the tax year and the revocation does not specify a prospective revocation date, the corporation is a regular corporation for that tax year.

The accumulated earnings tax is designed to prevent shareholders from avoiding tax at the shareholder level.

Calculate the corporate tax liability in each of the following circumstances: a.X Corporation has taxable income of $250,000 for its current calendar tax year. b.Y Corporation has $1,600,000 in taxable income for the current tax year. c.​ Z Corporation has taxable income of $100,000, before capital gains and losses, a short-term capital loss of $30,000, and a long-term capital gain of $10,000 in the current tax year.

The Birch Corporation has regular taxable income of $85,000 and a regular tax liability of $17,150. The corporation also has $45,000 of tax preference items. Calculate Birch Corporation's alternative minimum tax liability. Assume that the Birch Corporation is not a "small corporation."

Schedule M-1 on Form 1120 shows the reconciliation of a corporation's tax liability to the tax expense on the corporation's books.

The Nandina Corporation was formed and began operations on July 1, 2016, and incurred the following expenses during the year: If the corporation chooses not to expense but rather amortizes organizational costs over 180 months, what is the amount of its amortization expense for 2016?

Which of the following companies is taxed at a flat rate of 35 percent?

The Heal Yourself Health Care Corporation, a service corporation, has accumulated earnings of $375,000 and the corporation can establish a reasonable need for $125,000. Calculate the amount of the accumulated earnings tax, if any, that will be imposed on the corporation.

In 2016, Apricot Corporation had taxable income of $120,000. Included in taxable income was a $10,000 capital gain. The $120,000 of taxable income does not include a $15,000 capital loss carryforward available from the previous year. What is Apricot Corporation's 2016 income tax liability before any tax credits?

Is it correct to state that the maximum corporate tax rate is 35 percent? Please describe the structure of the corporate tax rate schedule in your answer.

The Bay Fig Corporation has $350,000 of taxable income from operations for the current year, and dividends of $50,000 received from 10 percent-owned domestic corporations. How much is the Bay Fig Corporation's dividends received deduction for the current year?

Which of the following items is not generally a schedule M-1 adjustment?

The original due date for a tax return of a corporation filing a Form 1120 with a calendar tax year-end falls before the original due date of a return for an individual taxpayer with the same tax year.

Robert, Kim, Tony, and Sharon decided to form the Cash Cow Corporation. In exchange for 40 percent of the stock, Robert contributed an apartment building with a fair market value of $700,000 and subject to a liability of $300,000. Robert's basis in the apartment building is $225,000. Kim contributed warehouse storage units worth $450,000 in exchange for 40 percent of the stock plus $50,000 in cash from the corporation. Her basis in the warehouse is $125,000. Tony contributed $100,000 cash for 10 percent of the stock. Sharon is performing services worth $100,000 for 10 percent of the stock. a.What is the recognized gain or recognized income for: 1.Robert 2.Kim 3.Tony 4.Sharon b.What is the basis in the stock for: 1.Robert 2.Kim 3.Tony 4.Sharon c.What is the corporation's basis in: 1.The apartment building 2.The warehouse

Corporations can elect to deduct up to $5,000 of organizational costs in the year they begin business, assuming their total organizational expenses do not exceed $50,000.

To prevent triple taxation, a corporation is entitled to deduct 50 percent of the dividends received from other domestic corporations.

Charitable contributions made by an S corporation are not deductible by the corporation; therefore, the shareholders receive no tax benefit from the contributions as itemized deductions.

Rex and Marsha each own 50 percent of the Grandiflora Corporation, an S corporation with a calendar tax year. At the beginning of the tax year, Marsha and Rex both have a basis in the stock of the corporation of $25,000. On June 30, 2016, Rex sells his interest in the corporation to George for $200,000, and for 2016 the Grandiflora Corporation has a loss of $90,000. a.Calculate the amount of the corporation's loss that may be deducted by Rex on his 2016 tax return. b.Calculate the amount of the corporation's loss that may be deducted by George on his 2016 tax return. c.Calculate the amount of the corporation's loss that may be deducted by Marsha on her 2016 tax return.