Question 1

Junco Corporation is a member of an expanded affiliated group (EAG)and has QPAI but no W-2 wages.Junco cannot claim a DPAD.

Accepted Answer

A) True 
 B)False

Question 2

Explain the wages limitation.

Accepted Answer

The DPAD is limited by 50% of an employe

Question 3

The ACE adjustment can be positive or negative.

Accepted Answer

A) True 
 B)False

Question 4

Tara's sole proprietorship consists of a bakery and retail food sales.The bakery's DPGR is $700,000,but after CGS,direct expenses,and a ratable portion of indirect expenses are deducted,QPAI is $200,000.W-2 wages related to DPGR are significant.The retail food sales have a loss of $1 million.If Tara files a joint return and her modified AGI is $109,420,what is her allowable DPAD,if any,for 2012?

Accepted Answer

A) None. 
B) $6,000. 
C) $9,000. 
D) $18,000. 
E) Some other amount. 
A) None. 
B) $6,000. 
C) $9,000. 
D) $18,000. 
E) Some other amount.

Question 5

Map,Inc. ,has taxable income of $13 million in 2012.What is the maximum DPAD tax savings for this C corporation?

Accepted Answer

A) None. 
B) $204,000. 
C) $210,000. 
D) $409,500. 
E) $441,000. 
A) None. 
B) $204,000. 
C) $210,000. 
D) $409,500. 
E) $441,000.

Question 6

The DPAD is not allowed for AMT purposes.

Accepted Answer

A) True 
 B)False

Question 7

Wow Corporation manufactures an exercise machine at a cost of $700 and sells the machine to Kite Corporation for $1,000 in 2012.Kite incurs TV advertising expenses of $300 and sells the machine by phone order for $1,600.If Wow and Kite corporations are members of an expanded affiliated group (EAG),their DPAD is:

Accepted Answer

A) $30. 
B) $45. 
C) $54. 
D) $500. 
E) None of the above. 
A) $30. 
B) $45. 
C) $54. 
D) $500. 
E) None of the above.

Question 8

Maize Corporation has gross receipts of $3 million of which $1 million are non-DPGR.CGS identified with DPGR is $1.3 million,while overall selling and administrative expenses are $600,000.Under the simplified deduction method,determine Maize's QPAI.

Accepted Answer

$300,000.Amount of overall exp

Question 9

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 10

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.

Junco Corporation is a member of an expanded affiliated group (EAG)and has QPAI but no W-2 wages.Junco cannot claim a DPAD.

Explain the wages limitation.

The ACE adjustment can be positive or negative.

Map,Inc. ,has taxable income of $13 million in 2012.What is the maximum DPAD tax savings for this C corporation?

The DPAD is not allowed for AMT purposes.

Maize Corporation has gross receipts of $3 million of which $1 million are non-DPGR.CGS identified with DPGR is $1.3 million,while overall selling and administrative expenses are $600,000.Under the simplified deduction method,determine Maize's QPAI.

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

Which formula is correct for DPAD?

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

Junco Corporation is a member of an expanded affiliated group (EAG)and has QPAI but no W-2 wages.Junco cannot claim a DPAD.

Explain the wages limitation.

The ACE adjustment can be positive or negative.

Map,Inc. ,has taxable income of $13 million in 2012.What is the maximum DPAD tax savings for this C corporation?

The DPAD is not allowed for AMT purposes.

Maize Corporation has gross receipts of $3 million of which $1 million are non-DPGR.CGS identified with DPGR is $1.3 million,while overall selling and administrative expenses are $600,000.Under the simplified deduction method,determine Maize's QPAI.

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

Which formula is correct for DPAD?

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