Question 1

Calliwell Corporation is a Colorado corporation engaged in the manufacture and sale of computer components. In 2012, 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 2012 taxable income is:

Accepted Answer

A)  $1,820,000 
B)  $1,920,000 
C)  $1,260,000 
D)  $1,914,000

Question 2

In its first taxable year, Platform, Inc. generated a $200,000 net operating loss and made a $10,000 cash donation to a local charity. In its second year, Platform generated $350,000 operating income and made a $20,000 donation to the same charity. Compute Platform's taxable income for its second year.

Accepted Answer

A)  $120,000 
B)  $135,000 
C)  $320,000 
D)  $130,000

Question 3

Rogers, Inc. owns 12% of Lampe Corporation's voting common stock. During the current year, Rogers generated $50,000 operating income and received $8,000 dividends from Lampe. Only $1,600 of the dividend is taxable.

Accepted Answer

A) True 
 B)False

Question 4

A corporation's minimum tax credit can reduce the corporation's future regular tax liability if regular tax liability exceeds tentative minimum tax in that year.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements about the calculation of alternative minimum taxable income is true?

Accepted Answer

A)  Excess percentage depletion is a positive adjustment to AMTI. 
B)  The AMT net operating loss can reduce AMTI to zero. 
C)  The AMTI exemption for all corporations is $40,000. 
D)  The minimum tax credit can be carried back two years.

Question 6

This year, Sonoma Corporation received the following dividends:  Before considering the above dividends, Sonoma has taxable income of $550,000. Calculate Sonoma's allowable dividends-received deduction and taxable income.

Accepted Answer

The answer of This year, Sonoma Corporation received the following...

Question 7

Generally, the corporate income tax is computed on a proportionate rate schedule.

Accepted Answer

A) True 
 B)False

Question 8

Angel Corporation's current-year regular tax liability is $40,000. Angel is eligible for a general business credit of $45,000. The corporation will receive a $5,000 refund of federal income tax.

Accepted Answer

A) True 
 B)False

Question 9

Corporation F owns 95 percent of the outstanding stock of Corporation
G. This year, the corporations' records provide the following information:

Accepted Answer

The answer of Corporation F owns 95 percent of the...

Question 10

Dividends-received deductions generally are not allowed for dividends from foreign corporations.

Accepted Answer

A) True 
 B)False

Question 11

Thunder, Inc. has invested in the stock of several corporations and has $500,000 operating income before dividends.  Calculate Thunder's dividends-received deduction and taxable income:

Accepted Answer

A)  DRD, $203,300; taxable income, $296,700 
B)  DRD, $169,640; taxable income, $533,660 
C)  DRD, $183,640; taxable income, $519,660 
D)  DRD $169,640; taxable income, $330,360

Question 12

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 13

Airfreight Corporation has book income of $370,000. Book income includes a $25,000 gain realized on a like-kind nontaxable exchange of equipment. Based only on these items, compute Airfreight's taxable income.

Accepted Answer

A)  $370,000 
B)  $395,000 
C)  $345,000 
D)  $420,000

Question 14

The corporate alternative minimum tax rate is 26% of AMTI in excess of the AMT exemption.

Accepted Answer

A) True 
 B)False

Question 15

At least three corporations are required to form an affiliated group.

Accepted Answer

A) True 
 B)False

Question 16

Sonic Corporation has a 35% marginal tax rate and received $10,000 of dividends from Roller, Inc., a U.S. corporation in which Sonic owns less than 2% of the outstanding stock. Sonic's effective tax rate on the Roller dividend is:

Accepted Answer

A)  35% 
B)  24.5% 
C)  10.5% 
D)  None of the above

Question 17

Tropical Corporation was formed in 2007. For 2007 through 2009, its regular and tentative minimum tax were as follows:  a. Compute Tropical's tax due for each year
b. In 2010, Tropical's regular taxable income is $2,000,000, and it has positive AMT adjustments of $500,000 and AMT preferences of $600,000. Compute Tropical's regular tax, tentative minimum tax, and tax due for 2010.

Accepted Answer

The answer of Tropical Corporation was formed in 2007. For...

Question 18

Morton Inc. is a Kansas corporation engaged exclusively in domestic manufacturing. In 2012, it earned $500,000 of qualified production income, which also equals its taxable income before the domestic manufacturing deduction. It paid compensation of $200,000 to its workforce. Calculate Morton's 2012 domestic production activities deduction and taxable income:

Accepted Answer

A)  Deduction $45,000; taxable income $455,000 
B)  Deduction $30,000; taxable income $470,000 
C)  Deduction $0; taxable income $500,000 
D)  Deduction $45,000; taxable income $255,000

Question 19

Calliwell Corporation is a Colorado corporation engaged in the manufacture and sale of computer components. In 2012, 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 2012 domestic production activities deduction is:

Accepted Answer

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

Question 20

Donatoni Corporation owns 40% of Market, Inc. voting common stock. During the current year, Donatoni received a $30,000 dividend from Market. Donatoni must report the dividend as gross income, and is allowed a $21,000 dividends-received deduction.

Accepted Answer

A) True 
 B)False

Exam 11: The Corporate Taxpayer

Rogers, Inc. owns 12% of Lampe Corporation's voting common stock. During the current year, Rogers generated $50,000 operating income and received $8,000 dividends from Lampe. Only $1,600 of the dividend is taxable.

A corporation's minimum tax credit can reduce the corporation's future regular tax liability if regular tax liability exceeds tentative minimum tax in that year.

Which of the following statements about the calculation of alternative minimum taxable income is true?

This year, Sonoma Corporation received the following dividends: Before considering the above dividends, Sonoma has taxable income of $550,000. Calculate Sonoma's allowable dividends-received deduction and taxable income.

Generally, the corporate income tax is computed on a proportionate rate schedule.

Angel Corporation's current-year regular tax liability is $40,000. Angel is eligible for a general business credit of $45,000. The corporation will receive a $5,000 refund of federal income tax.

Corporation F owns 95 percent of the outstanding stock of Corporation G. This year, the corporations' records provide the following information:

Dividends-received deductions generally are not allowed for dividends from foreign corporations.

Thunder, Inc. has invested in the stock of several corporations and has $500,000 operating income before dividends. Calculate Thunder's dividends-received deduction and taxable income:

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:

Airfreight Corporation has book income of $370,000. Book income includes a $25,000 gain realized on a like-kind nontaxable exchange of equipment. Based only on these items, compute Airfreight's taxable income.

The corporate alternative minimum tax rate is 26% of AMTI in excess of the AMT exemption.

At least three corporations are required to form an affiliated group.

Sonic Corporation has a 35% marginal tax rate and received $10,000 of dividends from Roller, Inc., a U.S. corporation in which Sonic owns less than 2% of the outstanding stock. Sonic's effective tax rate on the Roller dividend is:

Donatoni Corporation owns 40% of Market, Inc. voting common stock. During the current year, Donatoni received a $30,000 dividend from Market. Donatoni must report the dividend as gross income, and is allowed a $21,000 dividends-received deduction.