Question 1

For purposes of the penalty tax on accumulated earnings under § 531, reasonable needs of the business does not include:

Accepted Answer

A)  Product liability losses. 
B)  Self-insurance. 
C)  Loans to suppliers and customers. 
D)  Loans to employees. 
E)  Plant expansion. 
A)  Product liability losses. 
B)  Self-insurance. 
C)  Loans to suppliers and customers. 
D)  Loans to employees. 
E)  Plant expansion.

Question 2

The ACE adjustment can be positive or negative.

Accepted Answer

A) True 
 B)False

Question 3

Lime, Inc., has taxable income of $13 million in 2014. What is the maximum DPAD tax savings for this C corporation?

Accepted Answer

A)  $132,600 
B)  $265,200 
C)  $397,800 
D)  $409,500 
E)  None of the above 
A)  $132,600 
B)  $265,200 
C)  $397,800 
D)  $409,500 
E)  None of the above

Question 4

The accumulated earnings credit is always the greater of the minimum credit of $250,000 or the current E & P for the year needed to meet the reasonable needs of the business.

Accepted Answer

A) True 
 B)False

Question 5

Which statement is false?

Accepted Answer

A)  The overall tax effect of a DPAD is a rate reduction or a tax credit. 
B)  For a flow-through entity, modified AGI is substituted for taxable income. 
C)  FASB requires the DPAD to be reported as a special charge. 
D)  MPGE refers to a merge, paid, gain, and expense. 
E)  All of the above are correct. 
A)  The overall tax effect of a DPAD is a rate reduction or a tax credit. 
B)  For a flow-through entity, modified AGI is substituted for taxable income. 
C)  FASB requires the DPAD to be reported as a special charge. 
D)  MPGE refers to a merge, paid, gain, and expense. 
E)  All of the above are correct.

Question 6

Which of the following is always personal holding company income?

Accepted Answer

A)  Interest. 
B)  Rent income. 
C)  Gas royalties. 
D)  Personal service contract income. 
E)  All of the above. 
A)  Interest. 
B)  Rent income. 
C)  Gas royalties. 
D)  Personal service contract income. 
E)  All of the above.

Question 7

Harvey, a real estate developer, pays Abe, a general contractor, to construct an office building. Abe has no DPGR since he does not own the property.

Accepted Answer

A) True 
 B)False

Question 8

NOLs are negative adjustments.

Accepted Answer

A) True 
 B)False

Question 9

In 2014, May Corporation (a calendar year taxpayer) had the following transactions: Taxable income $4,000,000
Mining exploration costs claimed 1,000,000
Percentage depletion claimed (the property had a zero adjusted basis) 2,400,000
Donation of stock held since 1988 as investment (basis of $100,000
And fair market value of $400,000) to a qualified charity 400,000
Costs of goods sold 960,000
For 2014, May Corporation's AMTI is:

Accepted Answer

A)  $6,300,000. 
B)  $7,150,000. 
C)  $7,250,000. 
D)  $7,300,000. 
E)  None of the above. 
A)  $6,300,000. 
B)  $7,150,000. 
C)  $7,250,000. 
D)  $7,300,000. 
E)  None of the above.

Question 10

In terms of the effect of the DPAD, the maximum tax savings for a corporation with $10 million of taxable income is $316,000 in 2014.

Accepted Answer

A) True 
 B)False

Question 11

Which reason is unlikely to cause a regular corporation to have to pay AMT?

Accepted Answer

A)  A service-type of company with little inventory. 
B)  A high level of investment in assets such as equipment and structures. 
C)  Low taxable income due to a cyclical downturn, strong international competition, a low-margin industry, or other factors. 
D)  Investment at low real interest rates, which increases the company's deductions for depreciation relative to those for interest payments. 
E)  None of the above. 
A)  A service-type of company with little inventory. 
B)  A high level of investment in assets such as equipment and structures. 
C)  Low taxable income due to a cyclical downturn, strong international competition, a low-margin industry, or other factors. 
D)  Investment at low real interest rates, which increases the company's deductions for depreciation relative to those for interest payments. 
E)  None of the above.

Question 12

Which statement, if any, is false?

Accepted Answer

A)  An S corporation is subject to the corporate AMT. 
B)  A high level of investment in assets (e.g., equipment or structures) is a reason a company may be subject to the AMT. 
C)  Many of the adjustments that apply to individuals also apply to corporations. 
D)  The AMT is a separate tax system from the corporate income tax. 
E)  None of the above. 
A)  An S corporation is subject to the corporate AMT. 
B)  A high level of investment in assets (e.g., equipment or structures) is a reason a company may be subject to the AMT. 
C)  Many of the adjustments that apply to individuals also apply to corporations. 
D)  The AMT is a separate tax system from the corporate income tax. 
E)  None of the above.

Question 13

The regular foreign tax credit is available to reduce AMT liability.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following items will be a deduction from unadjusted AMTI in arriving at ACE?

Accepted Answer

A)  Federal income tax. 
B)  80% dividends received deduction. 
C)  Penalties and fines. 
D)  Premiums paid on key employee insurance. 
E)  None of the above. 
A)  Federal income tax. 
B)  80% dividends received deduction. 
C)  Penalties and fines. 
D)  Premiums paid on key employee insurance. 
E)  None of the above.

Question 15

Which of the following items will be an addition to AMTI in arriving at ACE?

Accepted Answer

A)  Excess capital loss. 
B)  Federal income tax. 
C)  Tax-exempt income. 
D)  Excess charitable contributions. 
E)  None of the above. 
A)  Excess capital loss. 
B)  Federal income tax. 
C)  Tax-exempt income. 
D)  Excess charitable contributions. 
E)  None of the above.

Question 16

Reasonable needs for purposes of the accumulated earnings tax do not include loans to shareholders.

Accepted Answer

A) True 
 B)False

Question 17

What amount of accumulated earnings of a service type corporation is considered within the reasonable needs of a business without the corporation having to show a bona fide business reason for the accumulation?

Accepted Answer

A)  $150,000 or less. 
B)  $200,000 or less. 
C)  $250,000 or less. 
D)  $300,000 or less. 
E)  None of the above. 
A)  $150,000 or less. 
B)  $200,000 or less. 
C)  $250,000 or less. 
D)  $300,000 or less. 
E)  None of the above.

Question 18

If mining exploration and development costs are capitalized and written off over 10 years, no adjustment is necessary for AMT purposes.

Accepted Answer

A) True 
 B)False

Question 19

The DPAD is not allowed for AMT purposes.

Accepted Answer

A) True 
 B)False

Question 20

June Corporation, a Tampa contractor, pays Gull Engineering a fee to design bridges for a highway June will build in Haiti. The fee Gull receives is DPGR.

Accepted Answer

A) True 
 B)False

For purposes of the penalty tax on accumulated earnings under § 531, reasonable needs of the business does not include:

The ACE adjustment can be positive or negative.

Lime, Inc., has taxable income of $13 million in 2014. What is the maximum DPAD tax savings for this C corporation?

The accumulated earnings credit is always the greater of the minimum credit of $250,000 or the current E & P for the year needed to meet the reasonable needs of the business.

Which statement is false?

Which of the following is always personal holding company income?

Harvey, a real estate developer, pays Abe, a general contractor, to construct an office building. Abe has no DPGR since he does not own the property.

NOLs are negative adjustments.

In terms of the effect of the DPAD, the maximum tax savings for a corporation with $10 million of taxable income is $316,000 in 2014.

Which reason is unlikely to cause a regular corporation to have to pay AMT?

Which statement, if any, is false?

The regular foreign tax credit is available to reduce AMT liability.

Which of the following items will be a deduction from unadjusted AMTI in arriving at ACE?

Which of the following items will be an addition to AMTI in arriving at ACE?

Reasonable needs for purposes of the accumulated earnings tax do not include loans to shareholders.

What amount of accumulated earnings of a service type corporation is considered within the reasonable needs of a business without the corporation having to show a bona fide business reason for the accumulation?

If mining exploration and development costs are capitalized and written off over 10 years, no adjustment is necessary for AMT purposes.

The DPAD is not allowed for AMT purposes.

June Corporation, a Tampa contractor, pays Gull Engineering a fee to design bridges for a highway June will build in Haiti. The fee Gull receives is DPGR.

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

For purposes of the penalty tax on accumulated earnings under § 531, reasonable needs of the business does not include:

The ACE adjustment can be positive or negative.

Lime, Inc., has taxable income of $13 million in 2014. What is the maximum DPAD tax savings for this C corporation?

The accumulated earnings credit is always the greater of the minimum credit of $250,000 or the current E & P for the year needed to meet the reasonable needs of the business.

Which statement is false?

Which of the following is always personal holding company income?

Harvey, a real estate developer, pays Abe, a general contractor, to construct an office building. Abe has no DPGR since he does not own the property.

NOLs are negative adjustments.

In terms of the effect of the DPAD, the maximum tax savings for a corporation with $10 million of taxable income is $316,000 in 2014.

Which reason is unlikely to cause a regular corporation to have to pay AMT?

Which statement, if any, is false?

The regular foreign tax credit is available to reduce AMT liability.

Which of the following items will be a deduction from unadjusted AMTI in arriving at ACE?

Which of the following items will be an addition to AMTI in arriving at ACE?

Reasonable needs for purposes of the accumulated earnings tax do not include loans to shareholders.

What amount of accumulated earnings of a service type corporation is considered within the reasonable needs of a business without the corporation having to show a bona fide business reason for the accumulation?

If mining exploration and development costs are capitalized and written off over 10 years, no adjustment is necessary for AMT purposes.

The DPAD is not allowed for AMT purposes.

June Corporation, a Tampa contractor, pays Gull Engineering a fee to design bridges for a highway June will build in Haiti. The fee Gull receives is DPGR.

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