Exam 5: Corporate Operations

TerraWise Inc. reported the following information for 2016: Regular taxable income \ 5,620,000 Regular depreciation \ 810,000 ATM depreciation \ 570,000 Adjusted basis of equipment sold - Regular \ 100,000 Adjusted basis of equipment sold - AMT \ 140,000 Income from a private-activity municipal bond issued in 2006 \ 45,000 Unfavorable ACE adjustment \ 35,000 $5,900,000, computed as follows: What is TerraWise Inc.'s AMTI?

Small corporations (in terms of average annual gross receipts) are exempt from the alternative minimum tax.

Which of the following regarding Schedule M-1 and Schedule M-3 of Form 1120 is false?

Corporations may carry excess charitable contributions forward five years, but they may not carry them back.

Tatoo Inc. reported a net capital loss of $13,000 in 2016. It had a net capital gain of $4,300 in 2014 and $3,000 in 2013. In 2015, although the company suffered a net operating loss, it had net capital gains of $1,000. What is the amount of Tatoo's capital loss carryover remaining after it applies the carryback?

In 2016, AutoUSA Inc. received $4,600,000 of book income, including $20,000 of interest income from tax-exempt municipal bonds. AutoUSA reported $3,600,000 of regular business expenses. If it made $350,000 of estimated tax payments (prepayments) throughout the tax year, what is its tax due or tax refund when it files its return? Assume AutoUSA pays taxes at a flat 34 percent rate and disregard the alternative minimum tax.

Minimum tax credits generated by the corporate AMT can be carried forward indefinitely.

Corporation A receives a dividend from Corporation B. Corporation A includes the dividend in its gross income for tax and financial accounting purposes (no book-tax difference). If A has accounted for the dividend correctly (following the general rule), how much of B stock does A own?

Which of the following is not calculated in the corporate income tax formula?

Netgate Corporation's gross regular tax liability for 2016 was $95,375. What was its taxable income?

Which of the following statements is false regarding consolidated tax returns?

Which of the following statements regarding the dividends and/or the dividends received deduction (DRD) is true?

For 2016, SRH's taxable income is $35,000 and JHH's taxable income is $45,000. Together, Scott and Jackson Howard own 100 percent of both corporations. What is the combined tax liability of the two corporations?

On January 1, 2014, Credit Inc. recorded goodwill valued at $270,000 when it acquired the assets of another company. At the end of 2015, the auditors of Credit Inc. determined that the goodwill had been impaired by $50,000 and Credit Inc. wrote down the book value of the goodwill by $50,000. During 2016, the goodwill was not further impaired. In 2017, additional goodwill was impaired and was written down another $18,000 for financial reporting purposes. What is the temporary book-tax difference associated with the purchased goodwill in 2015, 2016, and 2017? Are the differences favorable or unfavorable? Are the differences permanent or temporary?

Jazz Corporation owns 10% of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before the dividend was ($2,000). What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

Which of the following statements regarding the alternative minimum tax is false?

In general, a corporation can elect to use either the accrual or cash method of accounting no matter how large the corporation. Large corporations (average gross receipts exceeding $5 million over the prior three years) are required to use the accrual method.

Which of the following statements regarding controlled groups is false?

Which of the following statements is false regarding corporate estimated tax payments?