Exam 11: The Corporate Income Tax

Ficus, Inc. began business on March 1, 2014, and elected to file its income tax return on a calendar-year basis. The corporation incurred $800 in organizational expenditures. Assuming the corporation does not elect to expense but chooses to amortize the costs over 180 months, the maximum allowable deduction for amortization of organizational expenditures in 2014 is:

A corporation must reconcile, to the IRS's satisfaction, the differences between net income as shown on the company's books and taxable income (before special deductions and net operating losses) as shown on the tax return.

Roberta and Sally formed the Alder Corporation on October 1, 2014. On the same date, Roberta paid $75,000 cash to Alder Corporation for 1,500 shares of the corporation's common stock. Simultaneously, Sally received 100 shares of Alder Corporation's stock for services rendered. How much should Sally include in her taxable income for 2014, and what will be the basis of her Alder Corporation stock? ​ Taxable Income Basis of Stock

If the shareholders of an S corporation voluntarily revoke the corporation's S corporation status in the sixth month of the tax year and the revocation does not specify a prospective revocation date, the corporation is a regular corporation for that tax year.

A corporation owning 80 percent or more of the stock of another corporation has a dividends received deduction of 100 percent.

Corporations are not allowed to amortize the costs of organizing the corporation.

For the year ended December 31, 2014, Prunus, Inc., reported net income before federal income tax expense of $800,000 per the corporation's books. This figure included the following items: What is the taxable income of Prunus, Inc. for 2014?

The Great Gumball Corporation is a gumball producer. The corporation has accumulated earnings of $425,000 and it can establish a reasonable need for $360,000. Calculate the amount of the accumulated earnings tax, if any, that will be imposed on the corporation.

Fran, George, and Helen form FGH Corporation. In exchange for 300 shares of stock of the corporation, Fran contributes property with a basis of $15,000, fair market value of $50,000 and subject to a liability of $20,000 which the corporation assumed. George contributes property with a basis of $20,000, fair market value of $30,000 in exchange for 250 shares of stock of the corporation with a value of $25,000 plus $5,000 cash. Helen performs services for the corporation and receives $2,000 worth of stock (20 shares) in exchange for the services. a.What is the amount of Fran's recognized gain or loss on the transaction? b.What is Fran's basis in the stock of the corporation? c.What is the corporation's basis in the property received from Fran? d.What is the amount of George's recognized gain or loss on the transaction? e.What is George's basis in the stock of the corporation?

Avocado Corporation paid $3,000 in estimated tax payments for the calendar year ended December 31, 2014. The corporation has an actual tax liability of $4,000 for the year. a.If no extension is requested, when is the tax return due? b.If an extension of time to file is requested and approved, when is the tax return due? c.If an extension of time to file is requested and approved, when is the additional $1,000 of the 2014 tax due?

The accumulated earnings tax is designed to prevent shareholders from avoiding the individual income tax.

Corporations may deduct without limitation any amount of charitable contributions providing the amounts are paid to qualified organizations.

Ashwood Corporation has been in business for 20 years. For the previous 3 years, Ashwood Corporation had annual gross receipts of $3.3 million, $4.2 million and $5.4 million, respectively. For alternative minimum tax purposes, is Ashwood Corporation a small corporation? Give your reasoning and/or the calculation that you based your answer on. Also, why does it matter if they are a small corporation?

On July 1, 2014, Robert forms the Yew Corporation. In exchange for 100 percent of the corporation's stock, Robert contributes land with a fair market value of $100,000. Robert acquired the land 5 years ago at a cost of $30,000. At the date of the contribution, the land is subject to a $10,000 mortgage which the corporation assumes. What is the basis of the land to Yew Corporation?

The Lagerstroemia Corporation was formed on January 1, 2014. Calculate the Lagerstroemia Corporation's taxable income or loss for 2014 given the following information:

Which of the following is false in regards to filing requirements?

On July 1, 2014, Grey formed Arucaria Corporation. On that same date, Grey contributed $100,000 cash and transferred property with an adjusted basis of $60,000 to Arucaria in exchange for 3,000 shares of the corporation's common stock. The property transferred had a fair market value of $75,000 on the date of the transfer. Arucaria Corporation had no other shares of common stock outstanding on July 1, 2014. As a result of this transaction, Grey's basis in the stock and Arucaria Corporation's basis in the property (other than the cash), respectively, are:

The income of an S corporation is computed in much the same manner as that of a partnership.

Charitable contributions made by an S corporation are not deductible by the corporation; therefore, the shareholders receive no tax benefit from the contributions as itemized deductions.

S corporations pay taxes at a higher rate than do regular corporations.