Question 1

Which statement is false?

Accepted Answer

A)  The stock ownership requirement for the EAG rules is 80%. 
B)  Members of an EAG are treated as a single taxpayer for purposes of the DPAD. 
C)  For an EAG, the DPAD is allocated among the members in proportion to each member's respective amount of QPAI. 
D)  The DPAD of a consolidated group must be allocated to the group's members in proportion to each member's QPAI. 
E)  None of the above is false. 
A)  The stock ownership requirement for the EAG rules is 80%. 
B)  Members of an EAG are treated as a single taxpayer for purposes of the DPAD. 
C)  For an EAG, the DPAD is allocated among the members in proportion to each member's respective amount of QPAI. 
D)  The DPAD of a consolidated group must be allocated to the group's members in proportion to each member's QPAI. 
E)  None of the above is false. A

Question 2

Campbell, Inc., a calendar year corporation that was created in February 2010, has gross receipts as follows:
   Does Campbell qualify for the small corporation exemption for each year (2010 through 2015)?

Accepted Answer

Since Campbell is a new corporation in 2010, the company is automatically exempt from the corporate AMT under the small corporation exemption regardless of gross receipts. Campbell also qualifies for the exemption in 2011 as 2010 gross receipts do not exceed $5 million.
Campbell calculates average gross receipts in the later years to determine whether the small business exemption is available. These calculations for the subsequent tax years are as follows:
   Campbell qualifies for the exemption in 2012, since the average gross receipts for 2010-2011 do not exceed $7.5 million. Likewise, Campbell continues to qualify for the exemption in 2013, 2014, and 2015, since the average gross receipts for each preceding three-year period (2010-2012, 2011-2013, and 2012-2014, respectively) do not exceed $7.5 million.

Question 3

Passive activity losses of certain closely held corporations and personal service corporations are not tax preferences.

Accepted Answer

A) True 
 B)False  True

Question 4

Rose, Inc., an S corporation, has taxable income of $14 million in 2014. Assume there are two shareholders, each in the 35% tax bracket. What is the maximum total DPAD tax savings for the S corporation shareholders?

Accepted Answer

A)  None 
B)  $168,000 
C)  $285,600 
D)  $441,000 
E)  None of the above 
A)  None 
B)  $168,000 
C)  $285,600 
D)  $441,000 
E)  None of the above

Question 5

Which of the following is added in arriving at ACE?

Accepted Answer

A)  Tax-exempt income (net of expenses). 
B)  Federal income tax. 
C)  Premiums paid on key employees insurance. 
D)  Loss on sale between related parties. 
E)  None of the above. 
A)  Tax-exempt income (net of expenses). 
B)  Federal income tax. 
C)  Premiums paid on key employees insurance. 
D)  Loss on sale between related parties. 
E)  None of the above.

Question 6

Ohio Corporation, a calendar year taxpayer, has a beginning balance in accumulated E & P of $3.5 million and current earnings of $1 million. If Ohio can justify accumulations for the needs of the business of $4.1 million, its accumulated earnings credit for ATI purposes is:

Accepted Answer

A)  $0. 
B)  $200,000. 
C)  $600,000. 
D)  $4.1 million. 
E)  None of the above. 
A)  $0. 
B)  $200,000. 
C)  $600,000. 
D)  $4.1 million. 
E)  None of the above.

Question 7

One of the components of DPGR is qualified production property (QPP). The QPP must be manufactured, produced, grown, or extracted entirely within the U.S.

Accepted Answer

A) True 
 B)False

Question 8

The objective of the AMT is to force taxpayers that are more profitable than their taxable income reflects to pay additional income taxes.

Accepted Answer

A) True 
 B)False

Question 9

Yvonne Corporation manufactures and sells ceramic dinnerware. The company also sells dinnerware that is purchased from unrelated foreign producers. During the 2014 tax year, Yvonne had a U. S. profit of $1.3 million (QPAI) and a loss from the imported merchandise of $200,000. What is Yvonne's DPAD?

Accepted Answer

A)  $33,000 
B)  $66,000 
C)  $99,000 
D)  $1,080,000 
E)  None of the above 
A)  $33,000 
B)  $66,000 
C)  $99,000 
D)  $1,080,000 
E)  None of the above

Question 10

The percentage applicable for computing the DPAD will ultimately increase to 12%.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

A small corporation with unused minimum tax credits may use what percentage of regular tax as a minimum credit in 2014?

Accepted Answer

A)  0 
B)  25% 
C)  50% 
D)  75% 
E)  None of the above 
A)  0 
B)  25% 
C)  50% 
D)  75% 
E)  None of the above

Question 13

Which formula is correct for DPAD?

Accepted Answer

A)  Smaller of 9% of QPAI or 9% of modified AGI, not to exceed 50% of allocable wages. 
B)  Larger of 9% of QPAI or 9% of taxable income, not to exceed 50% of allocable wages. 
C)  Smaller of 9% of QPAI or 9% of taxable income, not to exceed 60% of allocable wages. 
D)  Larger of 9% of QPAI or 9% of alternative minimum tax, not to exceed 60% of allocable wages. 
E)  None of the above. 
A)  Smaller of 9% of QPAI or 9% of modified AGI, not to exceed 50% of allocable wages. 
B)  Larger of 9% of QPAI or 9% of taxable income, not to exceed 50% of allocable wages. 
C)  Smaller of 9% of QPAI or 9% of taxable income, not to exceed 60% of allocable wages. 
D)  Larger of 9% of QPAI or 9% of alternative minimum tax, not to exceed 60% of allocable wages. 
E)  None of the above.

Question 14

Why is the DPAD benefit somewhat unique?

Accepted Answer

The domestic production activities deduc

Question 15

In 2014, Job Corporation, a calendar year taxpayer, has AMTI (before adjustment for adjusted current earnings) of $7 million. If Job Corporation's ACE is $16 million, its tentative minimum tax for 2014 is:

Accepted Answer

A)  $2.55 million. 
B)  $2.75 million. 
C)  $3.45 million. 
D)  $4.2 million. 
E)  None of the above. 
A)  $2.55 million. 
B)  $2.75 million. 
C)  $3.45 million. 
D)  $4.2 million. 
E)  None of the above.

Question 16

The accumulated earnings credit for a personal service corporation is the greater of $150,000 or the current E & P for the year needed to meet the reasonable needs of the business.

Accepted Answer

A) True 
 B)False

Question 17

During 2014, Red Corporation (a calendar year taxpayer) has $4,000,000 of taxable income and the following transactions: AMTI (not including adjusted current earnings) $5,000,000
Adjusted current earnings 8,000,000
Red Corporation's alternative minimum tax (AMT) for 2014 is:

Accepted Answer

A)  $1,360,000. 
B)  $700,000. 
C)  $500,000. 
D)  $90,000. 
E)  None of the above. 
A)  $1,360,000. 
B)  $700,000. 
C)  $500,000. 
D)  $90,000. 
E)  None of the above.

Question 18

In each of the following independent situations, determine the DPAD for 2014 for the corporation involved.
   *Does not include a $120,000 NOL carryover from the prior year.
**Only $60,000 relates directly to manufacturing activities.

Accepted Answer

a. $15,000. The W-2 limitation of $15,00

Question 19

Which of the following would not be a positive tax preference item in 2014?

Accepted Answer

A)  Accelerated depreciation on real property in excess of straight-line. 
B)  Intangible drilling costs. 
C)  Alternative minimum tax NOL deduction. 
D)  Percentage depletion in excess of adjusted basis. 
E)  None of the above. 
A)  Accelerated depreciation on real property in excess of straight-line. 
B)  Intangible drilling costs. 
C)  Alternative minimum tax NOL deduction. 
D)  Percentage depletion in excess of adjusted basis. 
E)  None of the above.

Question 20

Fewer corporations are subject to the AMT than to the domestic production activities deduction.

Accepted Answer

A) True 
 B)False

Which statement is false?

Campbell, Inc., a calendar year corporation that was created in February 2010, has gross receipts as follows: Does Campbell qualify for the small corporation exemption for each year (2010 through 2015)?

Passive activity losses of certain closely held corporations and personal service corporations are not tax preferences.

Rose, Inc., an S corporation, has taxable income of $14 million in 2014. Assume there are two shareholders, each in the 35% tax bracket. What is the maximum total DPAD tax savings for the S corporation shareholders?

Which of the following is added in arriving at ACE?

Ohio Corporation, a calendar year taxpayer, has a beginning balance in accumulated E & P of $3.5 million and current earnings of $1 million. If Ohio can justify accumulations for the needs of the business of $4.1 million, its accumulated earnings credit for ATI purposes is:

One of the components of DPGR is qualified production property (QPP). The QPP must be manufactured, produced, grown, or extracted entirely within the U.S.

The objective of the AMT is to force taxpayers that are more profitable than their taxable income reflects to pay additional income taxes.

Yvonne Corporation manufactures and sells ceramic dinnerware. The company also sells dinnerware that is purchased from unrelated foreign producers. During the 2014 tax year, Yvonne had a U. S. profit of $1.3 million (QPAI) and a loss from the imported merchandise of $200,000. What is Yvonne's DPAD?

The percentage applicable for computing the DPAD will ultimately increase to 12%.

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

A small corporation with unused minimum tax credits may use what percentage of regular tax as a minimum credit in 2014?

Which formula is correct for DPAD?

Why is the DPAD benefit somewhat unique?

In 2014, Job Corporation, a calendar year taxpayer, has AMTI (before adjustment for adjusted current earnings) of $7 million. If Job Corporation's ACE is $16 million, its tentative minimum tax for 2014 is:

The accumulated earnings credit for a personal service corporation is the greater of $150,000 or the current E & P for the year needed to meet the reasonable needs of the business.

During 2014, Red Corporation (a calendar year taxpayer) has $4,000,000 of taxable income and the following transactions: AMTI (not including adjusted current earnings) $5,000,000 Adjusted current earnings 8,000,000 Red Corporation's alternative minimum tax (AMT) for 2014 is:

In each of the following independent situations, determine the DPAD for 2014 for the corporation involved. *Does not include a $120,000 NOL carryover from the prior year. **Only $60,000 relates directly to manufacturing activities.

Which of the following would not be a positive tax preference item in 2014?

Fewer corporations are subject to the AMT than to the domestic production activities deduction.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S: Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 3: Corporations: Special Situations

Which statement is false?

Campbell, Inc., a calendar year corporation that was created in February 2010, has gross receipts as follows: Does Campbell qualify for the small corporation exemption for each year (2010 through 2015)?

Passive activity losses of certain closely held corporations and personal service corporations are not tax preferences.

Rose, Inc., an S corporation, has taxable income of $14 million in 2014. Assume there are two shareholders, each in the 35% tax bracket. What is the maximum total DPAD tax savings for the S corporation shareholders?

Which of the following is added in arriving at ACE?

Ohio Corporation, a calendar year taxpayer, has a beginning balance in accumulated E & P of $3.5 million and current earnings of $1 million. If Ohio can justify accumulations for the needs of the business of $4.1 million, its accumulated earnings credit for ATI purposes is:

One of the components of DPGR is qualified production property (QPP). The QPP must be manufactured, produced, grown, or extracted entirely within the U.S.

The objective of the AMT is to force taxpayers that are more profitable than their taxable income reflects to pay additional income taxes.

Yvonne Corporation manufactures and sells ceramic dinnerware. The company also sells dinnerware that is purchased from unrelated foreign producers. During the 2014 tax year, Yvonne had a U. S. profit of $1.3 million (QPAI) and a loss from the imported merchandise of $200,000. What is Yvonne's DPAD?

The percentage applicable for computing the DPAD will ultimately increase to 12%.

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

A small corporation with unused minimum tax credits may use what percentage of regular tax as a minimum credit in 2014?

Which formula is correct for DPAD?

Why is the DPAD benefit somewhat unique?

In 2014, Job Corporation, a calendar year taxpayer, has AMTI (before adjustment for adjusted current earnings) of $7 million. If Job Corporation's ACE is $16 million, its tentative minimum tax for 2014 is:

The accumulated earnings credit for a personal service corporation is the greater of $150,000 or the current E & P for the year needed to meet the reasonable needs of the business.

During 2014, Red Corporation (a calendar year taxpayer) has $4,000,000 of taxable income and the following transactions: AMTI (not including adjusted current earnings) $5,000,000 Adjusted current earnings 8,000,000 Red Corporation's alternative minimum tax (AMT) for 2014 is:

In each of the following independent situations, determine the DPAD for 2014 for the corporation involved. *Does not include a $120,000 NOL carryover from the prior year. **Only $60,000 relates directly to manufacturing activities.

Which of the following would not be a positive tax preference item in 2014?

Fewer corporations are subject to the AMT than to the domestic production activities deduction.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S: Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters