Exam 16: Corporate Operations

In January 2016, Khors Company issues nonqualified stock options to its CEO, Jenny Svaro. Because the company does not expect Ms. Svaro to leave the company, the options vest at the time they are granted with a total value of $50,000. In December of 2016, the company experiences a surge in its stock price, and Ms. Svaro exercises the options. The total bargain element at the time of exercise is $40,000. For 2016, what is the nature of the book-tax difference due to the options exercised?

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

Which of the following describes the correct treatment of the exercise of nonqualified stock options (NQOs) that were granted when ASC 718 applies?

Remsco has taxable income of $60,000 and a charitable contribution limit modified taxable income of $72,000. Its charitable contributions for the year were $7,500. What is Remsco's current-year charitable contribution deduction and contribution carryover?

Canny Foods Co. is considering three ways it could contribute to a local, qualified charity. First, it could give $5,000 in cash. Second, it could give stock it initially purchased two years ago for $4,000 but is now worth $6,000. Third, it could give items of inventory with a fair market value of $7,000 but with an adjusted basis of $3,000. Which of the following correctly describes the relation among possible charitable contributions in terms of amount deductible for tax purposes?

It is important to distinguish between temporary and permanent book-tax differences for which of the following reasons?

In 2016, US Sys Corporation received $250,000 in death benefits after its CEO (a key employee) died (it included this amount in book income). For book purposes, US Sys also expensed life insurance premiums for other key employees in the amount of $20,000. In addition, for book purposes, it expensed $10,000 of meals and entertainment expenditures. What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the book-tax difference is temporary and what amount is permanent?

Net operating losses generally create permanent book-tax differences.

Which of the following is allowable as a deduction in calculating a corporation's net operating loss?

Which of the following is deductible in calculating DRD modified taxable income?

Studios reported a net capital loss of $30,000 in year 5. It reported net capital gains of $14,000 in year 4 and $27,000 in year 6. What is the amount and nature of the book-tax difference in year 6 related to the net capital carryover?

In 2013, Smith Traders Inc. reported taxable income of $100,000. In 2014, it reported taxable income of $15,000. In 2015, it reported taxable income of $95,000. In 2016, Smith Traders experienced a net operating loss of $25,000. What amount of refund can Smith Traders receive if it does not elect to forgo the carryback (see the corporate income tax schedule)?

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?

For incentive stock options granted when ASC 718 applies, the value of the options that accrue in a given year always creates a permanent, unfavorable book-tax difference.

A corporation with a minimum tax credit carryover may reduce regular tax down to the amount of its tentative minimum tax when its regular tax exceeds its tentative minimum tax.

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?

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

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