Question 1

The amount of a corporation's AMT is the amount of its tentative minimum tax in excess of its regular tax.

Accepted Answer

A) True 
 B)False

Question 2

An affiliated group must file a consolidated tax return.

Accepted Answer

A) True 
 B)False

Question 3

In a given year, Adams Corporation has goodwill impairment in excess of the allowable amortization for tax purposes. Adams has a favorable temporary book-tax difference for that year.

Accepted Answer

A) True 
 B)False

Question 4

On January 1, 2005 [before the adoption of ASC 718], Net Optimizers Inc. granted 1,000 nonqualified stock options (NQOs) valued at $.05 per option. Each option entitles the owner to purchase one share of stock for $1. These options vest at 10 percent per year for ten years. On December 31, 2016, 300 options are exercised when the stock price is $5. In 2016, what is the book-tax difference associated with the stock options? Is it favorable or unfavorable? Is it permanent or temporary?

Accepted Answer

$1,200, fa

Question 5

Depreciation adjustments can increase or decrease the AMT base relative to taxable income.

Accepted Answer

A) True 
 B)False

Question 6

Calendar-year corporations that request an extension for filing their 2016 tax returns will have a tax return due date of September 15.

Accepted Answer

A) True 
 B)False

Question 7

If a corporation's cash charitable contributions exceed the charitable contribution deduction limit, what kind of book-tax difference is created?

Accepted Answer

A) Permanent; favorable 
B) Permanent; unfavorable 
C) Temporary; favorable 
D) Temporary; unfavorable 
A) Permanent; favorable 
B) Permanent; unfavorable 
C) Temporary; favorable 
D) Temporary; unfavorable

Question 8

Federal income tax expense reported on a corporation's books generates a temporary book-tax difference for Schedule M-3 purposes.

Accepted Answer

A) True 
 B)False

Question 9

Coop Inc. owns 40% of Chicken Inc., both Coop and Chicken are corporations. Chicken pays Coop a dividend of $10,000 in 2016. Chicken also reports financial accounting earnings of $20,000 for that year. Assume that Coop follows the general rule of accounting for investment in Chicken. What is the amount and nature of the book-tax difference to Coop associated with the dividend distribution (ignoring the dividends received deduction)?

Accepted Answer

A) $2,000 unfavorable 
B) $2,000 favorable 
C) $10,000 unfavorable 
D) $10,000 favorable 
E) None of these 
A) $2,000 unfavorable 
B) $2,000 favorable 
C) $10,000 unfavorable 
D) $10,000 favorable 
E) None of these

Question 10

In 2016, LuxAir Inc. (LA) has book income of $160,000. Included in this figure is income generated from ownership in Jet Repair Corporation (JRC), of which LA owns 30%. JRC has $270,000 in earnings for the year and pays $32,000 in dividends to LA. Assuming accounting for the investment in JRC (income from JRC and the DRD) are its only book-tax differences, what is LA's tax liability for 2016 (see corporate tax schedule)?

Accepted Answer

$17,286, c

Question 11

Rapidpro Inc. had more than $1,000,000 of taxable income two years prior to the current year. It would like to use its prior year tax liability (which was very low but above zero) to determine its quarterly estimated payments this year. Which of the following statements is true?

Accepted Answer

A) Rapidpro may use the prior year tax liability to determine its first and second quarter estimated tax payments only since it is a large corporation. 
B) To avoid penalty, the second quarter estimated payment must be large enough to cover 50 percent of its estimated annual tax liability annualized from its first quarter estimated taxable income (assume it does not rely on its current year actual tax liability to determine its estimated tax payment). 
C) To avoid penalty, the third quarter estimated payment must be large enough to cover 50 percent of its estimated annual tax liability annualized from its third quarter estimated taxable income (assume it does not rely on its current year actual tax liability to determine its estimated tax payment). 
D) None of these is truE.Rapidpro can use its prior-year tax liability to determine only the first quarter payment.After that, it must use the current year's liability or the annualized income method to determine payments.The second quarter payment is based on the annualized tax liability from the first quarter taxable income. 
A) Rapidpro may use the prior year tax liability to determine its first and second quarter estimated tax payments only since it is a large corporation. 
B) To avoid penalty, the second quarter estimated payment must be large enough to cover 50 percent of its estimated annual tax liability annualized from its first quarter estimated taxable income (assume it does not rely on its current year actual tax liability to determine its estimated tax payment). 
C) To avoid penalty, the third quarter estimated payment must be large enough to cover 50 percent of its estimated annual tax liability annualized from its third quarter estimated taxable income (assume it does not rely on its current year actual tax liability to determine its estimated tax payment). 
D) None of these is truE.Rapidpro can use its prior-year tax liability to determine only the first quarter payment.After that, it must use the current year's liability or the annualized income method to determine payments.The second quarter payment is based on the annualized tax liability from the first quarter taxable income.

Question 12

Which of the following is not a type of controlled group as defined in the Internal Revenue Code?

Accepted Answer

A) Parent-subsidiary 
B) Brother-sister 
C) Combined 
D) All of these are types of controlled groups. 
A) Parent-subsidiary 
B) Brother-sister 
C) Combined 
D) All of these are types of controlled groups.

Question 13

Schedule M-1 reconciles from book income to bottom line taxable income (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 14

For book purposes, RadioAircast Inc. reported $15,000 of income from municipal bonds in 2016. It also expensed $12,000 of radio station filing fines paid to the FCC the same year. What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the total adjustment is permanent and what amount is temporary?

Accepted Answer

$3,000, favorable bo

Question 15

Corporations may carry net operating loss sustained in 2015 back two years and forward 20 years.

Accepted Answer

A) True 
 B)False

Question 16

For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following describes the correct treatment of incentive stock options (ISOs) granted when ASC 718 applies?

Accepted Answer

A) Financial accounting-no expense; tax-no deduction 
B) Financial accounting-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 accounting-no expense; tax-no deduction 
B) Financial accounting-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 18

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?

Accepted Answer

2015: $32,000 unfavorable, tem

Question 19

TireShop, Inc. owns 85% 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 20

Orange Inc. issued 20,000 nonqualified stock options valued at $40,000 (in total). The options vest over two years-half in 2016 (the year of issue) and half in 2017. One thousand options are exercised in 2017 with a bargain element on each option of $6. What is the 2017 book-tax difference associated with the stock options?

Accepted Answer

A) $6,000 unfavorable 
B) $6,000 favorable 
C) $24,000 unfavorable 
D) $24,000 favorable 
E) None of these 
A) $6,000 unfavorable 
B) $6,000 favorable 
C) $24,000 unfavorable 
D) $24,000 favorable 
E) None of these

The amount of a corporation's AMT is the amount of its tentative minimum tax in excess of its regular tax.

An affiliated group must file a consolidated tax return.

In a given year, Adams Corporation has goodwill impairment in excess of the allowable amortization for tax purposes. Adams has a favorable temporary book-tax difference for that year.

Depreciation adjustments can increase or decrease the AMT base relative to taxable income.

Calendar-year corporations that request an extension for filing their 2016 tax returns will have a tax return due date of September 15.

If a corporation's cash charitable contributions exceed the charitable contribution deduction limit, what kind of book-tax difference is created?

Federal income tax expense reported on a corporation's books generates a temporary book-tax difference for Schedule M-3 purposes.

Rapidpro Inc. had more than $1,000,000 of taxable income two years prior to the current year. It would like to use its prior year tax liability (which was very low but above zero) to determine its quarterly estimated payments this year. Which of the following statements is true?

Which of the following is not a type of controlled group as defined in the Internal Revenue Code?

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

Corporations may carry net operating loss sustained in 2015 back two years and forward 20 years.

For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.

Which of the following describes the correct treatment of incentive stock options (ISOs) granted when ASC 718 applies?

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

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 Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 16: Corporate Operations

The amount of a corporation's AMT is the amount of its tentative minimum tax in excess of its regular tax.

An affiliated group must file a consolidated tax return.

In a given year, Adams Corporation has goodwill impairment in excess of the allowable amortization for tax purposes. Adams has a favorable temporary book-tax difference for that year.

Depreciation adjustments can increase or decrease the AMT base relative to taxable income.

Calendar-year corporations that request an extension for filing their 2016 tax returns will have a tax return due date of September 15.

If a corporation's cash charitable contributions exceed the charitable contribution deduction limit, what kind of book-tax difference is created?

Federal income tax expense reported on a corporation's books generates a temporary book-tax difference for Schedule M-3 purposes.

Rapidpro Inc. had more than $1,000,000 of taxable income two years prior to the current year. It would like to use its prior year tax liability (which was very low but above zero) to determine its quarterly estimated payments this year. Which of the following statements is true?

Which of the following is not a type of controlled group as defined in the Internal Revenue Code?

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

Corporations may carry net operating loss sustained in 2015 back two years and forward 20 years.

For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.

Which of the following describes the correct treatment of incentive stock options (ISOs) granted when ASC 718 applies?

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

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 Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters