Question 1

Net operating losses generally create permanent book-tax differences.

Accepted Answer

A) True 
 B)False

Question 2

The City of Boston made a capital contribution of land to Fenway Company as an inducement to the company to build a manufacturing plant in the city. What is the tax basis of the land to Fenway Company?

Accepted Answer

Zero.
Explanation: Contributio

Question 3

A corporation generally will report a favorable, temporary book-tax difference when it deducts a charitable contribution carryover.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following describes the correct treatment of the exercise of nonqualified stock options (NQOs)?

Accepted Answer

A)  Financial-no expense; tax-no deduction 
B)  Financial-no expense; tax-deduct bargain element at exercise 
C)  Financial-expense value over vesting period; tax-no deduction 
D)  Financial-expense value over vesting period; tax-deduct bargain element at exercise 
A)  Financial-no expense; tax-no deduction 
B)  Financial-no expense; tax-deduct bargain element at exercise 
C)  Financial-expense value over vesting period; tax-no deduction 
D)  Financial-expense value over vesting period; tax-deduct bargain element at exercise

Question 5

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

Accepted Answer

A)  An affiliated group can file a consolidated tax return only if it elects to do so. 
B)  To file a consolidated tax return, one corporation must own at least 50% of the stock of another corporation. 
C)  For a group of corporations filing a consolidated tax return, an advantage is that losses of one group member may offset gains of another group member. 
D)  For a group of corporations filing a consolidated tax return, losses from certain intercompany transactions are deferred until realized through a transaction outside of the group. 
A)  An affiliated group can file a consolidated tax return only if it elects to do so. 
B)  To file a consolidated tax return, one corporation must own at least 50% of the stock of another corporation. 
C)  For a group of corporations filing a consolidated tax return, an advantage is that losses of one group member may offset gains of another group member. 
D)  For a group of corporations filing a consolidated tax return, losses from certain intercompany transactions are deferred until realized through a transaction outside of the group.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Most corporations use the annualized income method to determine their required annual payment for purposes of making quarterly estimated payments.

Accepted Answer

A) True 
 B)False

Question 8

Schedule M-1 reconciles from book income to the taxable income that is applied to the tax rates to determine the corporation's gross tax liability.

Accepted Answer

A) True 
 B)False

Question 9

AR Systems Inc. (AR) had $120,000 of tax liability last year. It anticipates a current-year tax liability of $500,000. Assuming AR is considered a large corporation for purposes of estimating tax liability, what are the minimum estimated tax payments it should make to avoid underpayment penalties? Ignore the annualized income method.

Accepted Answer

Q1: $30,000, Q2: $220,000, Q3: $125,000,

Question 10

Which of the following statements best describes the "built-in loss" rules that apply to property transferred to a corporation under section 351?

Accepted Answer

A)  If the basis of a property transferred to a corporation under section 351 exceeds its fair market value, the corporation will always take a tax basis in the property equal to the property's fair market value. 
B)  If the basis of a property transferred to a corporation under section 351 exceeds its fair market value, the corporation will always take a tax basis in the property equal to the property's tax basis in the hands of the shareholder. 
C)  If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value, the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate fair market value of the property. 
D)  If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value, the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate tax basis of the property. 
A)  If the basis of a property transferred to a corporation under section 351 exceeds its fair market value, the corporation will always take a tax basis in the property equal to the property's fair market value. 
B)  If the basis of a property transferred to a corporation under section 351 exceeds its fair market value, the corporation will always take a tax basis in the property equal to the property's tax basis in the hands of the shareholder. 
C)  If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value, the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate fair market value of the property. 
D)  If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value, the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate tax basis of the property.

Question 11

Keegan incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and tax bases. $$\begin{array} { | l | r | r | } 
\hline & \text { FMV } & \text { Tax Basis } \
\hline \text { Inventory } & \$ 30,000 & \$ 10,000 \
\hline \text { Building } & 130,000 & 80,000 \
\hline \text { Land } & \underline { 50,000 } & \underline { 100,000 } \
\hline \text { Total } & \$ 210,000 & \$ 190,000 \
\hline
\end{array}$$ The fair market value of the corporation's stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Keegan.
Assuming the gain or loss realized in the previous problem is deferred under section 351, what is Keegan's basis in the stock he receives in his corporation?

Accepted Answer

$164,000
Explanation: The stoc

Question 12

AB Inc. received a dividend from CD Corporation and is able to claim the dividends received deduction without limitation. AB owns 10 percent of CD. What is AB's marginal tax rate (to the nearest tenth of a percent) on the dividends received (after taking the DRD into account) assuming its ordinary marginal tax rate is 34%?

Accepted Answer

10.2% [34%

Question 13

TireShop, Inc. owns 85 percent of Rubber Supply Co.'s voting stock throughout the tax year. TireShop and Rubber Supply would be considered as what kind of controlled group?

Accepted Answer

A)  Parent-subsidiary 
B)  Brother-sister 
C)  Combined 
D)  None of these 
A)  Parent-subsidiary 
B)  Brother-sister 
C)  Combined 
D)  None of these

Question 14

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

Accepted Answer

A)  Dividends are taxed at preferential rates for corporations as well as for individuals. 
B)  The DRD can increase the net operating loss of a corporation. 
C)  Corporations are allowed to deduct from a dividend received the product of the dividend and the percentage of the receiving corporation's ownership in the distributing corporation's stock. 
D)  The DRD allows corporations to deduct the amount of dividends that they distribute. 
A)  Dividends are taxed at preferential rates for corporations as well as for individuals. 
B)  The DRD can increase the net operating loss of a corporation. 
C)  Corporations are allowed to deduct from a dividend received the product of the dividend and the percentage of the receiving corporation's ownership in the distributing corporation's stock. 
D)  The DRD allows corporations to deduct the amount of dividends that they distribute.

Question 15

Federal income tax expense reported on a corporation's books generates a temporary book-tax difference.

Accepted Answer

A) True 
 B)False

Question 16

Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $50 on the property transferred. What is Antoine's tax basis in the stock received in the exchange?

Accepted Answer

A)  $600 
B)  $550 
C)  $500 
D)  $450 
A)  $600 
B)  $550 
C)  $500 
D)  $450

Question 17

A corporation may carry a net capital loss back three years and forward five years.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following does NOT create a temporary book-tax difference?

Accepted Answer

A)  Deferred compensation 
B)  Bad-debt expense 
C)  Depreciation expense 
D)  Domestic production activities deduction 
A)  Deferred compensation 
B)  Bad-debt expense 
C)  Depreciation expense 
D)  Domestic production activities deduction

Question 19

The corporate tax form is Form 1065.

Accepted Answer

A) True 
 B)False

Question 20

A taxpayer always will have a tax basis in boot received in a section 351 transaction equal to its fair market value.

Accepted Answer

A) True 
 B)False

Net operating losses generally create permanent book-tax differences.

The City of Boston made a capital contribution of land to Fenway Company as an inducement to the company to build a manufacturing plant in the city. What is the tax basis of the land to Fenway Company?

A corporation generally will report a favorable, temporary book-tax difference when it deducts a charitable contribution carryover.

Which of the following describes the correct treatment of the exercise of nonqualified stock options (NQOs)?

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

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

Most corporations use the annualized income method to determine their required annual payment for purposes of making quarterly estimated payments.

Schedule M-1 reconciles from book income to the taxable income that is applied to the tax rates to determine the corporation's gross tax liability.

Which of the following statements best describes the "built-in loss" rules that apply to property transferred to a corporation under section 351?

TireShop, Inc. owns 85 percent of Rubber Supply Co.'s voting stock throughout the tax year. TireShop and Rubber Supply would be considered as what kind of controlled group?

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

Federal income tax expense reported on a corporation's books generates a temporary book-tax difference.

A corporation may carry a net capital loss back three years and forward five years.

Which of the following does NOT create a temporary book-tax difference?

The corporate tax form is Form 1065.

A taxpayer always will have a tax basis in boot received in a section 351 transaction equal to its fair market value.

An Introduction to Tax

Tax Compliance , the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S: Corporations

Filters

Exam 13: Corporate Formations and Operations

Net operating losses generally create permanent book-tax differences.

The City of Boston made a capital contribution of land to Fenway Company as an inducement to the company to build a manufacturing plant in the city. What is the tax basis of the land to Fenway Company?

A corporation generally will report a favorable, temporary book-tax difference when it deducts a charitable contribution carryover.

Which of the following describes the correct treatment of the exercise of nonqualified stock options (NQOs)?

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

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

Most corporations use the annualized income method to determine their required annual payment for purposes of making quarterly estimated payments.

Schedule M-1 reconciles from book income to the taxable income that is applied to the tax rates to determine the corporation's gross tax liability.

Which of the following statements best describes the "built-in loss" rules that apply to property transferred to a corporation under section 351?

TireShop, Inc. owns 85 percent of Rubber Supply Co.'s voting stock throughout the tax year. TireShop and Rubber Supply would be considered as what kind of controlled group?

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

Federal income tax expense reported on a corporation's books generates a temporary book-tax difference.

A corporation may carry a net capital loss back three years and forward five years.

Which of the following does NOT create a temporary book-tax difference?

The corporate tax form is Form 1065.

A taxpayer always will have a tax basis in boot received in a section 351 transaction equal to its fair market value.

An Introduction to Tax

Tax Compliance , the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S: Corporations

Filters