Exam 11: The Corporate Income Tax

The corporate alternative minimum tax rate is 28 percent.

Corporations are granted favorable tax treatment for short-term capital losses.

The Heal Yourself Health Care Corporation, a service corporation, has accumulated earnings of $375,000 and the corporation can establish a reasonable need for $125,000. Calculate the amount of the accumulated earnings tax, if any, that will be imposed on the corporation.

The Birch Corporation has regular taxable income of $85,000 and a regular tax liability of $17,150. The corporation also has $45,000 of tax preference items. Calculate Birch Corporation's alternative minimum tax liability. Assume that the Birch Corporation is not a "small corporation."

In 2014, Apricot Corporation had taxable income of $120,000. Included in taxable income was a $10,000 capital gain. The $120,000 of taxable income does not include a $15,000 capital loss carryforward available from the previous year. What is Apricot Corporation's 2014 income tax liability before any tax credits?

During 2014, the Squamata Corporation, a regular C corporation, has $30,000 in ordinary income, a long-term capital loss of $20,000, and a short-term capital gain of $10,000. a.Calculate the Squamata Corporation's tax liability for 2014. b.​Explain the nature and amount of any carrybacks or carryforwards that the corporation is entitled to use.

If a corporation is unable to deduct a capital loss against capital gains for a particular tax year, it loses the tax benefit since the loss may not be carried to other tax years.

Rob, Bill, and Steve form Big Company. Rob performs $45,000 of services for his shares of the company. Bill transferred property with a basis of $5,000 for $75,000 of stock. Steve contributes cash of $100,000 for his shares. Which of the three must recognize income in the year of the formation?

ABC Company owns 40 percent of JMT Company and 95 percent of DEM Company. JMT pays a $80,000 dividend to ABC and DEM pays a $40,000 dividend to ABC in 2014. Assuming that ABC has $1,000,000 of taxable income, calculate ABC's dividends received deduction for 2014.

Terry forms the Camphor Corporation during 2014. She transfers property with a value of $700,000 to Camphor Corporation in exchange for 100 percent of the stock in the corporation. Terry's basis in the property transferred was $400,000 and the corporation assumed a $275,000 mortgage on the property. If the fair market value of the stock received by Terry is $450,000, what is the corporation's basis in the property received from Terry?

In general, estimated payments for calendar-year corporations are due on:

During 2014, the Melaleuca Corporation received dividends from 50-percent-owned domestic corporations in the amount of $100,000. a.​​Assuming that in addition to the dividend income the corporation has gross income from operations of $250,000 and deductible operating expenses of $210,000, calculate the amount of the corporation's dividends received deduction for 2014. b.​​If, instead of $250,000 in gross income from operations, the corporation has $200,000 in gross income from operations and the same amount of dividends and expenses, calculate the amount of the corporation's dividends received deduction for 2014.

The Nandina Corporation was formed and began operations on July 1, 2014, and incurred the following expenses during the year: If the corporation chooses not to expense but rather amortizes organizational costs over 180 months, what is the amount of its amortization expense for 2014?

As a general rule, the transfer of property to a corporation in exchange for stock does not result in a taxable transaction.

Which of the following corporations is allowed to make an S corporation election?

Corporations pay a flat 30 percent federal income tax.

Robert, Kim, Tony, and Sharon decided to form the Cash Cow Corporation. In exchange for 40 percent of the stock, Robert contributed an apartment building with a fair market value of $700,000 and subject to a liability of $300,000. Robert's basis in the apartment building is $225,000. Kim contributed warehouse storage units worth $450,000 in exchange for 40 percent of the stock plus $50,000 in cash from the corporation. Her basis in the warehouse is $125,000. Tony contributed $100,000 cash for 10 percent of the stock. Sharon is performing services worth $100,000 for 10 percent of the stock. a. What is the recognized gain or recognized income for:1. Robert2. Kim3. Tony4. Sharon b. What is the basis in the stock for:1. Robert2. Kim3. Tony4. Sharon c. What is the corporation's basis in:1. The apartment building2. The warehouse

Rex and Marsha each own 50 percent of the Grandiflora Corporation, an S corporation with a calendar tax year. At the beginning of the tax year, Marsha and Rex both have a basis in the stock of the corporation of $25,000. On June 30, 2014, Rex sells his interest in the corporation to George for $200,000, and for 2014 the Grandiflora Corporation has a loss of $90,000. a.Calculate the amount of the corporation's loss that may be deducted by Rex on his 2014 tax return. b.Calculate the amount of the corporation's loss that may be deducted by George on his 2014 tax return. c.Calculate the amount of the corporation's loss that may be deducted by Marsha on her 2014 tax return.

Calculate the corporate tax liability in each of the following circumstances: a.X Corporation has taxable income of $250,000 for its 2014 calendar tax year. b.Y Corporation has $1,600,000 in taxable income for 2014. c.​Z Corporation has taxable income of $100,000, before capital gains and losses, a short-term capital loss of $30,000, and a long-term capital gain of $10,000 in 2014.

The Bay Fig Corporation has $350,000 of taxable income from operations for 2014, and dividends of $100,000 received from 10 percent-owned domestic corporations. How much is the Bay Fig Corporation's dividends received deduction for 2014?