Question 1

Grumond was incorporated on January 1,2010,and adopted a calendar year for tax purposes.It had the following gross receipts for its first six taxable years:   For which of these years is Grumond exempt from AMT?

Accepted Answer

A) 2011 
B) 2011,2012,and 2013 
C) 2011,2012,2013,and 2014 
D) 2011,2012,2013,2014,and 2016

Question 2

TasteCo,Inc.reported $210,500 of taxable income this year.What is its regular tax liability?

Accepted Answer

A) $82,095 
B) $65,345 
C) $73,675 
D) $71,570

Question 3

The purpose of Schedule M-1 is to explain the differences between financial statement income and taxable income.

Accepted Answer

A) True 
 B)False

Question 4

Palm Corporation has book income of $424,000.Book income reflects $200,000 income tax expense and $55,000 depreciation expense.Tax depreciation expense computed under MACRS is $65,000.Palm received $25,000 of prepaid rent not included in book income.Based only on these items,compute Palm's taxable income.

Accepted Answer

A) $639,000 
B) $609,000 
C) $659,000 
D) $589,000

Question 5

The stock of Wheel Corporation,a U.S.company,is publicly traded,with no single shareholder owning more than 5 percent of its outstanding stock.Wheel owns 90 percent of the outstanding stock of Axle,Inc,also a U.S.company.Axle owns 100% of the outstanding stock of Tire Corporation,a German company.Wheel and Tire each own 50 percent of the outstanding stock of Bumper,Inc.,a U.S.company.Wheel and Axle each own 50 percent of the outstanding stock of Trunk Corporation,a U.S.company.Which of these corporations form an affiliated group eligible to file a consolidated tax return?

Accepted Answer

A) Wheel,Axle,Tire,Bumper,and Trunk are an affiliated group. 
B) Wheel,Axle,and Tire are an affiliated group. 
C) Wheel and Axle are an affiliated group. 
D) Wheel,Axle,and Trunk are an affiliated group.

Question 6

John's,Inc.manufactures and sells fine furniture.What is John's regular tax liability if it had taxable income of $40,000,000?

Accepted Answer

A) $14,000,000 
B) $13,600,000 
C) $15,600,000 
D) $16,000,000

Question 7

Which of the following statements regarding the tax treatment of corporate dividends is true?

Accepted Answer

A) All shareholders receiving dividend payments from U.S.corporations are entitled to a dividends-received deduction. 
B) Dividends-received from foreign corporations are eligible for the dividends-received deduction. 
C) Corporations are entitled to deduct dividend payments to shareholders in calculating corporate taxable income. 
D) Dividend payments between members of an affiliated group of corporations filing a consolidated return are tax exempt.

Question 8

The corporate alternative minimum tax is designed to insure that corporations with substantial economic income will pay their fair share of the federal tax burden.

Accepted Answer

A) True 
 B)False

Question 9

A corporate taxpayer would prefer a $50,000 deduction to a $50,000 credit.

Accepted Answer

A) True 
 B)False

Question 10

A nonprofit corporation may incur a federal income tax if it has unrelated business income.

Accepted Answer

A) True 
 B)False

Question 11

Calliwell Corporation is a Colorado corporation engaged in the manufacture and sale of computer components.This year,it earned $2 million of net income from this qualified activity.Before the domestic production activities deduction,its taxable income is $2,100,000 and compensation paid to its U.S.workforce is $670,000.Its allowable domestic production activities deduction is:

Accepted Answer

A) $180,000 
B) $120,000 
C) $189,000 
D) $335,000

Question 12

Fleet,Inc.owns 85% of the stock of Pete,Inc.and 35% of the stock of Zete,Inc.and 90% of the stock of Stock ownership of Bete,Inc.Bete owns 5% of the stock of Pete and 5% of the stock of Zete.Zete owns 10% of the stock of Bete.The remaining stock of Pete and Zete is owned by unrelated individuals.Which of the following statements is correct?

Accepted Answer

A) Fleet,Zete,Pete,and Bete are an affiliated group. 
B) Fleet and Zete are an affiliated group. 
C) Fleet and Pete are an affiliated group. 
D) Fleet,Pete,and Bete are an affiliated group.

Question 13

For tax years beginning after December 31,2015,which of the following statements regarding corporate tax filing requirements is false?

Accepted Answer

A) Corporations must file their annual federal income tax returns by the 15th day of the fourth month following the close of the taxable year. 
B) Most corporations may request an automatic six-month extension of time to file their federal income tax returns. 
C) An extension of the income tax filing deadline does not extend the payment deadline for any balance of tax due for the taxable year. 
D) Corporations must file their annual federal income tax returns by 15th day of the third month following the close of the taxable year.

Question 14

Honu,Inc.has book income of $1,200,000.Book income includes $620,000 income tax expense,$10,000 of municipal bond interest income,and $150,000 of meals and entertainment expense.Based only on these items,compute Honu's taxable income.

Accepted Answer

A) $1,820,000 
B) $1,905,000 
C) $1,960,000 
D) $1,885,000

Question 15

In determining the incidence of the corporate income tax:

Accepted Answer

A) Corporations may pass the tax burden onto consumers in the form of higher prices 
B) Corporate shareholders may bear the burden of the corporate tax in the form of lower return on investment 
C) Corporate employees may bear the burden of the corporate tax in the form of lower compensation 
D) All of the above parties may bear the indirect burden of the corporate income tax

Question 16

If a corporation's depreciation expense for regular tax purposes is $32,000 and its depreciation expense for alternative minimum tax purposes is $28,000,such corporation will have a negative (decrease)depreciation adjustment for alternative minimum taxable income.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements regarding the taxation of corporate profits is true?

Accepted Answer

A) Dividends payments are deductible in computing corporate taxable income. 
B) The tax treatment of corporate dividends creates a bias in favor of debt financing. 
C) Corporations cannot deduct interest payments in computing corporate taxable income. 
D) Corporations with high debt-to-equity ratios have less burdensome cash flow commitments and lower risk of insolvency.

Question 18

Brace,Inc.owns 90% of West common stock.This year,Brace generated $50,000 operating income and received $10,000 dividends from West.Brace's taxable income is:

Accepted Answer

A) $53,000 
B) $58,000 
C) $50,000 
D) $52,000

Question 19

Corporations with taxable incomes in excess of $18,333,333 have a 35% marginal tax rate and a 35% average tax rate.

Accepted Answer

A) True 
 B)False

Question 20

Slipper Corporation has book income of $500,000.Book income includes a $50,000 gain on the sale of equipment.The equipment originally cost $110,000 and was sold for $75,000.Accumulated book depreciation was $85,000; accumulated MACRS depreciation was $90,000.Based only on these items,compute Slipper's taxable income.

Accepted Answer

A) $505,000 
B) $495,000 
C) $555,000 
D) $445,000

Exam 11: The Corporate Taxpayer

Grumond was incorporated on January 1,2010,and adopted a calendar year for tax purposes.It had the following gross receipts for its first six taxable years: For which of these years is Grumond exempt from AMT?

TasteCo,Inc.reported $210,500 of taxable income this year.What is its regular tax liability?

The purpose of Schedule M-1 is to explain the differences between financial statement income and taxable income.

John's,Inc.manufactures and sells fine furniture.What is John's regular tax liability if it had taxable income of $40,000,000?

Which of the following statements regarding the tax treatment of corporate dividends is true?

The corporate alternative minimum tax is designed to insure that corporations with substantial economic income will pay their fair share of the federal tax burden.

A corporate taxpayer would prefer a $50,000 deduction to a $50,000 credit.

A nonprofit corporation may incur a federal income tax if it has unrelated business income.

For tax years beginning after December 31,2015,which of the following statements regarding corporate tax filing requirements is false?

Honu,Inc.has book income of $1,200,000.Book income includes $620,000 income tax expense,$10,000 of municipal bond interest income,and $150,000 of meals and entertainment expense.Based only on these items,compute Honu's taxable income.

In determining the incidence of the corporate income tax:

If a corporation's depreciation expense for regular tax purposes is $32,000 and its depreciation expense for alternative minimum tax purposes is $28,000,such corporation will have a negative (decrease)depreciation adjustment for alternative minimum taxable income.

Which of the following statements regarding the taxation of corporate profits is true?

Brace,Inc.owns 90% of West common stock.This year,Brace generated $50,000 operating income and received $10,000 dividends from West.Brace's taxable income is:

Corporations with taxable incomes in excess of $18,333,333 have a 35% marginal tax rate and a 35% average tax rate.