Exam 3: Corporations: Special Situations

Under some circumstances, the sale of prepared food at a taxpayer's retail facility can qualify as DPGR.

What is undistributed PHCI?

Intangible drilling costs are a tax preference item only for integrated oil companies.

Once a small corporation for AMT purposes, always a small corporation.

Moon Corporation sells customized outdoor grills. It purchases various parts and materials from foreign sources for $500 and incurs $160 in labor costs at a factory in Virginia to fabricate and assemble the product. Moon also incurs packaging, selling, and other costs of $40 and sells the grill for $800. If tax year 2014 is involved, calculate Moon's per unit: a. DPGR b. QPAI c. DPAD

AMTI may be defined as regular taxable income after AMT adjustments (other than the NOL and ACE adjustments) and after tax preferences.

Which of the following statements does not reflect the rules regarding pass-through entities and DPAD?

DPGR - Allowable Indirect Costs = QPAI. Is this formula correct?

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

In the case of corporations that are members of an expanded affiliated group (EAG), the DPAD is determined by treating the group as a single taxpayer.

A negative ACE adjustment is beneficial to a corporation.

Gerbil Corporation was formed in 2004. If in 2014, it has average gross receipts of under $7.5 million, the company cannot be subject to the AMT.

The AMT rate for corporations is the same as for individuals.

Dennis, an advertising executive, pays a contractor to build a lodge on property he owns in Colorado. If Dennis sells the lodge, the proceeds (less the cost of the land) will be DPGR.

Bluejay Corporation, a calendar year taxpayer, manufactures and sells candles. It has several factories in the U.S. and one in Jamaica. During 2014, it had DPGR of $4.1 million from the U.S. factories. a. If the gross receipts from the products made in Jamaica are $200,000, what is Bluejay's DPGR for 2014? b. If the gross receipts sourced to the Jamaica plant are $300,000, what is Bluejay's DPGR for 2014?

Green, Inc., has $2 million in gross receipts of which $1.2 million is DPGR. Its cost of goods sold is $850,000 and other deductions (marketing, administrative) are $350,000. Using the small business simplified deduction method, determine Green's QPAI.

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 not an embedded service that qualifies as DPGR.

Bozeman Corporation manufactures an exercise machine at a cost of $800 and sells the machine to Denver Corporation for $1,030 in 2014. Denver incurs TV advertising expenses of $315 and sells the machine by phone order for $1,600. If Bozeman and Denver corporations are members of an expanded affiliated group (EAG), their DPGR is:

Netting refers to the process of AMT adjustments reversing themselves and then being deducted from taxable income to arrive at AMTI.

Green Company, a U.S. corporation based in Texas, manufactures and sells a product which includes some components made in the Dominican Republic. None of Green's income from sales constitute DPGR.