Question 1

Yvonne Corporation manufactures and sells ceramic dinnerware. The company also sells dinnerware that is purchased from unrelated foreign producers. During tax year 2011, Yvonne had a U. S. profit of $1.2 million (QPAI) and a loss from the imported merchandise of $100,000. What is Yvonne's DPAD?

Accepted Answer

A)  $33,000. 
B)  $66,000. 
C)  $99,000. 
D)  $1,080,000. 
E)  None of the above.

Question 2

Once a small corporation for AMT purposes, always a small corporation.

Accepted Answer

A) True 
 B)False

Question 3

Some of the meals a food service company prepares for its chain of restaurants is frozen and shipped to supermarkets for resale. The proceeds from such sales will qualify as DPGR.

Accepted Answer

A) True 
 B)False

Question 4

The domestic production activities deduction is limited to manufacturers.

Accepted Answer

A) True 
 B)False

Question 5

AMTI may be defined as regular taxable income after AMT adjustments (other than the NOL and ACE adjustments) and after tax preferences.

Accepted Answer

A) True 
 B)False

Question 6

A retail company has the following items related to AMT.
  Calculate the company's AMT, if any.

Accepted Answer

The answer of A retail company has the following items...

Question 7

Which statement is false?

Accepted Answer

A)  The stock ownership requirement for the EAG rules is 80%. 
B)  Members of an EAG are treated as a single taxpayer for purposes of the DPAD. 
C)  For an EAG, the DPAD is allocated among the members in proportion to each member's respective amount of QPAI. 
D)  The DPAD of a consolidated group must be allocated to the group's members in proportion to each member's QPAI. 
E)  None of the above is false.

Question 8

If QPAI cannot be used in any one year due to the TI limitation, it can be carried over for 5 years.

Accepted Answer

A) True 
 B)False

Question 9

Cave Corporation, a calendar year taxpayer, has a beginning balance in accumulated E & P of $3.5 million and current earnings of $1 million. If Cave can justify accumulations for the needs of the business of $3.7 million, its accumulated earnings credit for ATI purposes is:

Accepted Answer

A)  $3.7 million. 
B)  $250,000. 
C)  $200,000. 
D)  $0. 
E)  None of the above.

Question 10

DPAD for 2011 is 9% of the greater of QPAI or TI, but not to exceed the W-2 wages limitation.

Accepted Answer

A) True 
 B)False

Question 11

Lee, Inc., an S corporation, has taxable income of $15 million in 2011. Assume there are two shareholders, each in the top individual tax bracket. What is the maximum total DPAD tax savings for the S corporation shareholders?

Accepted Answer

A)  None. 
B)  $294,000. 
C)  $472,500. 
D)  $1,260,000. 
E)  None of the above.

Question 12

In the case of corporations that are members of an expanded affiliated group (EAG), the DPAD is determined by treating the group as a single taxpayer.

Accepted Answer

A) True 
 B)False

Question 13

The accumulated earnings credit for a personal service corporation is the greater of $150,000 or the current E & P for the year needed to meet the reasonable needs of the business.

Accepted Answer

A) True 
 B)False

Question 14

The overall effect of the domestic production activities deduction is similar to a rate reduction.

Accepted Answer

A) True 
 B)False

Question 15

Swan Corporation has average gross receipts of $5.5 million, $4.7 million, and $4.6 million in 2008, 2009, and 2010, respectively. Is the company a small corporation with respect to the AMT?

Accepted Answer

The answer of Swan Corporation has average gross receipts of...

Question 16

Which of the following is added in arriving at ACE?

Accepted Answer

A)  Tax-exempt income (net of expenses). 
B)  Federal income tax. 
C)  Premiums paid on key employees insurance. 
D)  Loss on sale between related parties. 
E)  None of the above.

Question 17

Staff, Inc., has taxable income of $14 million in 2011. What is the maximum DPAD tax savings for this C corporation?

Accepted Answer

A)  None. 
B)  $204,000. 
C)  $210,000. 
D)  $428,400. 
E)  $441,000.

Question 18

Maize Corporation has gross receipts of $3 million of which $1 million are non-DPGR. CGS identified with DPGR is $1.3 million, while overall selling and administrative expenses are $600,000. Under the simplified deduction method, determine Maize's QPAI.

Accepted Answer

The answer of Maize Corporation has gross receipts of $3...

Question 19

The objective of the AMT is to force taxpayers that are more profitable than their taxable income reflects to pay additional income taxes.

Accepted Answer

A) True 
 B)False

Question 20

Tanver Corporation, a calendar year corporation, has alternative minimum taxable income of $7 million in 2011 (before adjustment for adjusted current earnings). If Tanver's adjusted current earnings is $16 million, its tentative minimum tax for 2011 is:

Accepted Answer

A)  $310,000. 
B)  $2,750,000. 
C)  $6,750,000. 
D)  $7,000,000. 
E)  Some other amount.

Exam 3: Corporations: Special Situations

Yvonne Corporation manufactures and sells ceramic dinnerware. The company also sells dinnerware that is purchased from unrelated foreign producers. During tax year 2011, Yvonne had a U. S. profit of $1.2 million (QPAI) and a loss from the imported merchandise of $100,000. What is Yvonne's DPAD?

Once a small corporation for AMT purposes, always a small corporation.

Some of the meals a food service company prepares for its chain of restaurants is frozen and shipped to supermarkets for resale. The proceeds from such sales will qualify as DPGR.

The domestic production activities deduction is limited to manufacturers.

AMTI may be defined as regular taxable income after AMT adjustments (other than the NOL and ACE adjustments) and after tax preferences.

A retail company has the following items related to AMT. Calculate the company's AMT, if any.

Which statement is false?

If QPAI cannot be used in any one year due to the TI limitation, it can be carried over for 5 years.

Cave Corporation, a calendar year taxpayer, has a beginning balance in accumulated E & P of $3.5 million and current earnings of $1 million. If Cave can justify accumulations for the needs of the business of $3.7 million, its accumulated earnings credit for ATI purposes is:

DPAD for 2011 is 9% of the greater of QPAI or TI, but not to exceed the W-2 wages limitation.

Lee, Inc., an S corporation, has taxable income of $15 million in 2011. Assume there are two shareholders, each in the top individual tax bracket. What is the maximum total DPAD tax savings for the S corporation shareholders?

In the case of corporations that are members of an expanded affiliated group (EAG), the DPAD is determined by treating the group as a single taxpayer.

The accumulated earnings credit for a personal service corporation is the greater of $150,000 or the current E & P for the year needed to meet the reasonable needs of the business.

The overall effect of the domestic production activities deduction is similar to a rate reduction.

Swan Corporation has average gross receipts of $5.5 million, $4.7 million, and $4.6 million in 2008, 2009, and 2010, respectively. Is the company a small corporation with respect to the AMT?

Which of the following is added in arriving at ACE?

Staff, Inc., has taxable income of $14 million in 2011. What is the maximum DPAD tax savings for this C corporation?

Maize Corporation has gross receipts of $3 million of which $1 million are non-DPGR. CGS identified with DPGR is $1.3 million, while overall selling and administrative expenses are $600,000. Under the simplified deduction method, determine Maize's QPAI.

The objective of the AMT is to force taxpayers that are more profitable than their taxable income reflects to pay additional income taxes.

Tanver Corporation, a calendar year corporation, has alternative minimum taxable income of $7 million in 2011 (before adjustment for adjusted current earnings) . If Tanver's adjusted current earnings is $16 million, its tentative minimum tax for 2011 is: