Question 1

Corporations are not subject to alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 2

When a corporation is formed,the transaction is tax-free.

Accepted Answer

A) True 
 B)False

Question 3

JJJ Company has earnings and profits of $30,000.The corporation distributes property with a basis of $40,000 and a FMV of $35,000 to Jill,its sole shareholder.Her basis in the stock is $30,000.Which of the following statements is correct?

Accepted Answer

A) JJJ Company records a loss of $5,000. 
B) Jill reports dividend income of $35,000. 
C) Jill reports a nontaxable return of capital of $5,000. 
D) None of the statements are correct. 
A) JJJ Company records a loss of $5,000. 
B) Jill reports dividend income of $35,000. 
C) Jill reports a nontaxable return of capital of $5,000. 
D) None of the statements are correct.

Question 4

Windy Company has taxable income before DRD of $200,000.Included in that amount is a $10,000 dividend from a domestic corporation owned 10% by Windy and a $30,000 dividend from a domestic corporation owned 60% by Windy.What is the taxable income of Windy Company?

Accepted Answer

A) $168,000. 
B) $181,000. 
C) $169,000. 
D) $179,000. 
A) $168,000. 
B) $181,000. 
C) $169,000. 
D) $179,000.

Question 5

The corporate alternative minimum tax exemption begins to phase out for AMT income of ________,and is completely phased out at AMT income of ________ or more.

Accepted Answer

A) $150,000; $310,000 
B) $150,000; $300,000 
C) $40,000; $310,000 
D) $40,000; $150,000 
A) $150,000; $310,000 
B) $150,000; $300,000 
C) $40,000; $310,000 
D) $40,000; $150,000

Question 6

Initially,corporations with average annual gross receipts for the last three years of $5 million or less are not subject to the corporate AMT rules.

Accepted Answer

A) True 
 B)False

Question 7

Khaki Company is a Subchapter S corporation.It properly reported net income of $100,000 for financial statement purposes.It had charitable contributions of $5,000 and dividend income of $10,000 from a large domestic publicly traded company.What is the ordinary business income of Khaki Company that will be reported to its shareholders on Schedule K-1?

Accepted Answer

A) $93,000. 
B) $95,000. 
C) $90,000. 
D) $100,000. 
A) $93,000. 
B) $95,000. 
C) $90,000. 
D) $100,000.

Question 8

Keisha is a shareholder in a corporation.She received a distribution of property from the earnings and profits of the corporation.Keisha will report dividend income equal to the FMV of the property received.

Accepted Answer

A) True 
 B)False

Question 9

Adam owns 100% of Banana Company and has a basis of $60,000 in its stock.The company has earnings and profits of $54,000 and distributes a cash dividend to Adam of $72,000.Adam has a:

Accepted Answer

A) Nontaxable distribution of $6,000. 
B) Capital gain of $12,000. 
C) Nontaxable distribution of $18,000. 
D) Dividend of $72,000. 
A) Nontaxable distribution of $6,000. 
B) Capital gain of $12,000. 
C) Nontaxable distribution of $18,000. 
D) Dividend of $72,000.

Question 10

When a corporation is formed,if the transferors own 80% or more of the corporation immediately after the exchange,then the transaction is,generally,tax-free.

Accepted Answer

A) True 
 B)False

Question 11

Schedule L is prepared using the accounting method the corporation uses to keep its financial accounting records.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is correct?

Accepted Answer

A) 50% of travel and entertainment expenses are added to taxable income to arrive at book income. 
B) Charitable contributions in excess of the 10% limit are added to book income to arrive at taxable income. 
C) Federal income tax expense is subtracted from book income to arrive at taxable income. 
D) Tax-exempt interest income is subtracted from taxable income to arrive at book income. 
A) 50% of travel and entertainment expenses are added to taxable income to arrive at book income. 
B) Charitable contributions in excess of the 10% limit are added to book income to arrive at taxable income. 
C) Federal income tax expense is subtracted from book income to arrive at taxable income. 
D) Tax-exempt interest income is subtracted from taxable income to arrive at book income.

Question 13

What is the dividends received deduction DRD)in each of the following independent cases?
a.Taxable income before DRD is $50,000.Dividend from a 30%-owned domestic corporation is
$5,000.
b.Taxable income before DRD is $300,000.Dividend from a 10%-owned domestic corporation is
$75,000.
c.Taxable income before DRD is $80,000.Dividend from a 60%-owned domestic corporation is
$90,000.

Accepted Answer

a.The DRD is 80% of the divide

Question 14

Red Corporation has taxable income before DRD of $174,000.Included in that amount is a dividend of $20,000 from a large publicly-traded domestic corporation.Red also made a $25,000 cash contribution to a qualified charitable organization.The contribution is not included in the net income amount given.What is taxable income of Red Corporation?

Accepted Answer

A) $135,000. 
B) $142,600. 
C) $144,000. 
D) $140,600. 
A) $135,000. 
B) $142,600. 
C) $144,000. 
D) $140,600.

Question 15

A capital loss carryforward will create a reconciling item on Schedule M-1,but a capital loss carryback will not.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is incorrect?

Accepted Answer

A) A distribution of appreciated property creates a gain to the corporation. 
B) A distribution from earnings and profits in excess of stockholder basis is a nontaxable return of capital. 
C) Distributions paid in excess of earnings and profits are nontaxable to the extent of stockholder basis. 
D) Earnings and profits are conceptually similar to retained earnings. 
A) A distribution of appreciated property creates a gain to the corporation. 
B) A distribution from earnings and profits in excess of stockholder basis is a nontaxable return of capital. 
C) Distributions paid in excess of earnings and profits are nontaxable to the extent of stockholder basis. 
D) Earnings and profits are conceptually similar to retained earnings.

Question 17

As part of a corporate formation meeting the 80% test,an individual who contributes property and receives,in return,stock plus property,will report a taxable gain equal to the lower of the FMV of the property received or the gain on the transfer.

Accepted Answer

A) True 
 B)False

Question 18

When the 80% test is met,a stockholder may recognize a gain but will not recognize a loss.

Accepted Answer

A) True 
 B)False

Question 19

To legally operate as a corporation in most states,the incorporators must simply file a corporate federal income tax return.

Accepted Answer

A) True 
 B)False

Question 20

If a corporation has a net capital loss,the loss is carried forward indefinitely.

Accepted Answer

A) True 
 B)False

Corporations are not subject to alternative minimum tax.

When a corporation is formed,the transaction is tax-free.

JJJ Company has earnings and profits of $30,000.The corporation distributes property with a basis of $40,000 and a FMV of $35,000 to Jill,its sole shareholder.Her basis in the stock is $30,000.Which of the following statements is correct?

Windy Company has taxable income before DRD of $200,000.Included in that amount is a $10,000 dividend from a domestic corporation owned 10% by Windy and a $30,000 dividend from a domestic corporation owned 60% by Windy.What is the taxable income of Windy Company?

The corporate alternative minimum tax exemption begins to phase out for AMT income of ,and is completely phased out at AMT income of or more.

Initially,corporations with average annual gross receipts for the last three years of $5 million or less are not subject to the corporate AMT rules.

Keisha is a shareholder in a corporation.She received a distribution of property from the earnings and profits of the corporation.Keisha will report dividend income equal to the FMV of the property received.

Adam owns 100% of Banana Company and has a basis of $60,000 in its stock.The company has earnings and profits of $54,000 and distributes a cash dividend to Adam of $72,000.Adam has a:

When a corporation is formed,if the transferors own 80% or more of the corporation immediately after the exchange,then the transaction is,generally,tax-free.

Schedule L is prepared using the accounting method the corporation uses to keep its financial accounting records.

Which of the following statements is correct?

A capital loss carryforward will create a reconciling item on Schedule M-1,but a capital loss carryback will not.

Which of the following statements is incorrect?

As part of a corporate formation meeting the 80% test,an individual who contributes property and receives,in return,stock plus property,will report a taxable gain equal to the lower of the FMV of the property received or the gain on the transfer.

When the 80% test is met,a stockholder may recognize a gain but will not recognize a loss.

To legally operate as a corporation in most states,the incorporators must simply file a corporate federal income tax return.

If a corporation has a net capital loss,the loss is carried forward indefinitely.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income Line 12 of Form 1040 and Schedule C

Capital Gains and Other Sales of Property Schedule D and Form 4797

Rental Property, royalties, and Income From Flow-Through Entities Line 17, form 1040, and Schedule E

Tax Credits Form 1040, lines 46 Through 54 and Lines 66a Through 73

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Filters

Exam 15: Corporate Taxation

Corporations are not subject to alternative minimum tax.

When a corporation is formed,the transaction is tax-free.

JJJ Company has earnings and profits of $30,000.The corporation distributes property with a basis of $40,000 and a FMV of $35,000 to Jill,its sole shareholder.Her basis in the stock is $30,000.Which of the following statements is correct?

Windy Company has taxable income before DRD of $200,000.Included in that amount is a $10,000 dividend from a domestic corporation owned 10% by Windy and a $30,000 dividend from a domestic corporation owned 60% by Windy.What is the taxable income of Windy Company?

The corporate alternative minimum tax exemption begins to phase out for AMT income of ________,and is completely phased out at AMT income of ________ or more.

Initially,corporations with average annual gross receipts for the last three years of $5 million or less are not subject to the corporate AMT rules.

Keisha is a shareholder in a corporation.She received a distribution of property from the earnings and profits of the corporation.Keisha will report dividend income equal to the FMV of the property received.

Adam owns 100% of Banana Company and has a basis of $60,000 in its stock.The company has earnings and profits of $54,000 and distributes a cash dividend to Adam of $72,000.Adam has a:

When a corporation is formed,if the transferors own 80% or more of the corporation immediately after the exchange,then the transaction is,generally,tax-free.

Schedule L is prepared using the accounting method the corporation uses to keep its financial accounting records.

Which of the following statements is correct?

A capital loss carryforward will create a reconciling item on Schedule M-1,but a capital loss carryback will not.

Which of the following statements is incorrect?

As part of a corporate formation meeting the 80% test,an individual who contributes property and receives,in return,stock plus property,will report a taxable gain equal to the lower of the FMV of the property received or the gain on the transfer.

When the 80% test is met,a stockholder may recognize a gain but will not recognize a loss.

To legally operate as a corporation in most states,the incorporators must simply file a corporate federal income tax return.

If a corporation has a net capital loss,the loss is carried forward indefinitely.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income Line 12 of Form 1040 and Schedule C

Capital Gains and Other Sales of Property Schedule D and Form 4797

Rental Property, royalties, and Income From Flow-Through Entities Line 17, form 1040, and Schedule E

Tax Credits Form 1040, lines 46 Through 54 and Lines 66a Through 73

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Filters

The corporate alternative minimum tax exemption begins to phase out for AMT income of ,and is completely phased out at AMT income of or more.