Exam 13: Corporate Formations and Operations

Jazz Corporation owns 10% of Favors Corp. stock. Favors distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before the dividend was ($6,000). What is the amount of Jazz's dividends received deduction on the dividend it received from FavorsCorp.?

Datasoft Inc. received $350,000 in dividends from CSLabs Inc. Datasoft's taxable income before the dividends received deduction and $20,000 charitable contribution deduction is $300,000. What is Datasoft's DRD assuming it owns 15 percent of the CSLabs Inc. stock?

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

An unfavorable temporary book-tax difference is so named because it causes taxable income to decrease relative to book income.

Corporations have a larger standard deduction than individual taxpayers because they generally have higher revenues.

IndusTree Inc. received $1,800,000 from the sale of a property. The property's adjusted basis for regular tax purposes was $200,000 at the time of the sale. The property's adjusted basis for AMT purposes was $290,000. What is the amount of the AMT adjustment due to the sale of the asset? Does it increase or decrease AMTI?

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?

The definition of property as it relates to a section 351 transaction includes money.

Imperial Construction Inc. (IC) issued 100,000 incentive stock options (ISOs) to its employees on December 31, 2015 with an estimated value of $5.50 per option. The options vest at 25 percent per year for four years (beginning on December 31, 2016). Each option allows the holder to purchase one share of stock at $8. On December 31, 2016, employees exercised 12,500 options when IC's stock was valued at $14.72 per share. What is the amount of the book-tax difference in 2016 associated with the incentive stock options? Is it favorable or unfavorable? Is it temporary or permanent?

Which of the following statements best describes the tax results to a shareholder in a section 351 transaction when liabilities on property transferred to the corporation are assumed by the corporation?

Calendar-year corporations that request an extension for filing their tax returns will have a tax return due date of September 15.

During 2016, Hughes Corporation sold a portfolio of stock it had held for five years at a loss of $200,000. It also sold some investment land and recognized a capital gain of $180,000. In 2014, Hughes reported a net capital gain of $12,000 and in 2015 it recognized a net capital gain of $6,000. What is the amount of its net capital loss carryover to 2016?

What is the unextended due date of the tax return of a calendar-year corporation?

Three brothers each own 20 percent of the stock in three corporations. Because no single brother owns more than 50 percent of a corporation, the tax law would not treat the corporations as a controlled group.

Over what time period do corporations amortize purchased goodwill for tax purposes?

Which of the following statements regarding nonqualified stock options (NQOs) is false?

Which of the following statements best describes the tax consequences that arise from a contribution of capital to a corporation by an existing shareholder?

iScope Inc. paid $3,000 in interest on a loan it used to purchase municipal bonds. What is the nature of the book-tax difference relating to this expense?

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

XPO Corporation has a minimum tax credit of $51,000 from 2015. If its 2016 tentative minimum tax is $211,000 and its regular tax liability is $250,000, what is its minimum tax credit carryover to 2017?