Fed Tax 1: Chapter 11 LS

Sandy Corporation has a minimum tax credit carryforward of $200,000. This year, Sandy's regular tax liability is $130,000. How much minimum tax credit can Sandy use this year? Assume the tax year is 2018 and Sandy does not make the quickie refund election provided in the CARES Act.

$165,000 Reason: $130,000 + 50% × ($200,000- $130,000)

ABC has taxable income before the dividends-received deduction of $40,000. Included in the calculation of such taxable income is $50,000 of dividends from corporations in which ABC owns less than 20 percent equity. What amount of dividends-received deduction can ABC claim?

$20,000 Reason: DRD is limited to 50% of taxable income ($40,000 × 50% = $20,000).

Adams Corporation purchased a certified historic structure for $500,000 and spent $2,000,000 renovating it for use as office space. Adams can claim a rehabilitation tax credit of what amount?

$400,000 Reason: $2,000,000 renovation cost × 20%

X Corporation qualifies for a current year tax credit of $20,000. If X has taxable income and tax liability of $500,000 and $105,000, respectively, before considering the credit, X's final taxable income and tax due are ______.

$500,000 taxable income and $85,000 tax due

Olive Corporation has taxable income of $3,500,000 for its fiscal year ended June 30, 2018. Olive's regular federal income tax liability is $

962,500

Which of the following taxpayers can claim a dividends-received deduction?

A domestic corporation receiving a dividend from another domestic corporation

For a calendar year corporation, what are the due dates of its quarterly estimated tax payments?

April 15th; June 15th; September 15th; and December 15th

Which of the following are currently available corporate tax credits? (Select all that apply.)

Empowerment zone employment credit Rehabilitation credit Foreign tax credit Low-income housing credit Alternative-fuel vehicles credit

True or false: Corporate limited liability permits corporate creditors to access the personal assets of corporate shareholders for payment of corporate debts.

False

True or false: Schedule M-1 is referred to as a book/tax reconciliation. Which of the following statements regarding this reconciliation is true?

For many corporations, line 10 of the schedule does not actually match taxable income on page 1 of Form 1120.

Shares of a publicly held corporation ______. (Select all that apply.)

may be owned by thousands of shareholders are traded on an established securities market

Corporate limited liability ______.

protects shareholders' personal assets from claims against the corporation

An extension of time to file the corporate tax return ______.

provides an additional six months to file a corporate return in a timely manner

For a corporation, ______ ______ generally equals gross income minus allowable deductions.

taxable income

The Tax Cuts and Jobs Act of 2017 repealed ______.

the corporate AMT, but left the AMT in place for individuals

Rose Corporation has current year taxable income of $16,000,000. Rose's regular federal income tax liability is $

3,360,000

This year, Canna Corporation, a U.S. company, received a dividend from Lotus Inc., also a U.S. company. If Canna owns 50 percent of the outstanding stock of Lotus, what is the appropriate dividends-received deduction percentage?

65 percent

Alpha, a publicly traded U.S. corporation, owns 100% of the stock of Beta, another U.S. corporation. Beta owns 100% of the stock of Gamma, a French corporation. Alpha and Beta each own 50% of the stock of Lambda, a U.S. corporation. Which of these entities are included in an affiliated group for U.S. tax purposes?

Alpha, Beta, and Lambda

Which of the following is generally considered a nonprofit corporation? (Select all that apply.)

Church University

Who bears the economic burden of the corporate tax? (Select all that apply.)

Corporate employees Corporate customers Corporate shareholders

Which of the following are generally deductible in computing corporate taxable income?

Cost recovery deductions Ordinary and necessary business expenses

Which of the following payments to corporate investors is not deductible by the corporation? (Select all that apply.)

Dividend payments to stockholders Principal payments to bondholders

schedules M-1 and M-3 both provide a reconciliation between book and taxable income. However, Schedule ______ is much more detailed than Scheduel ______.

M-3 M-1

What is the initial due date of the corporate tax return for a corporation with a January 31, 2020 year-end?

May 15, 2020

Which of the following are included in an affiliated group for tax purposes? (Select all that apply.)

Parent corporations and domestic subsidiaries in which the parent owns 80 percent or more of the stock Domestic corporations owned 80 percent or more by other group members

In describing the organization of Schedule M-3, ______. (Select all that apply.)

Part II details book/tax differences related to income and loss items Part III details book/tax differences related to expense and deduction items

Which of the following approaches has Congress adopted to reduce the double taxation of corporate profits?

Preferential tax rates on dividend income

In comparing Schedule M-1 and Schedule M-3, ______. (Select all that apply.)

Schedule M-3 is much more detailed than Schedule M-1 both schedules reconcile from book income to taxable income

Which of the following statements regarding the incidence of the corporate income tax is false?

The burden of the corporate income tax falls on the corporation and generally cannot be shifted to other parties.

Starland, Inc. made quarterly installment payments of tax for 2020 totaling $100,000. If Starland determines that its final 2020 tax owed is $120,000, by what date must the excess be paid?

The initial due date of the tax return

Congress could reform the corporate tax system to eliminate double taxation in which of the following ways? (Select all that apply.)

Treat corporations as passthrough entities Exempt dividend income from taxation

The reconciliation between book and taxable income is necessary because GAAP and tax reporting use different measurement principles.

True Reason: Differences commonly arise between income as measured by GAAP and income for tax purposes.

Free transferability of corporate equity interests ______. (Select all that apply.)

allows investors to buy and sell shares at will increases corporate access to investors and venture capitalists

The ______ ______ ______was a second tax system, parallel to the regular federal income tax.

alternative minimum tax

The rehabilitation tax credit ______. (Select all that apply.)

applies to renovation or reconstruction of certified historic structures encourages businesses to undertake urban renewal projects, rather than demolish historic buildings

Tax credits ______. (Select all that apply.)

are generally non-refundable, if the total credit available exceeds the tax due before credits provide a dollar-for-dollar reduction in tax liability

Shares of a closely held corporation ______. (Select all that apply.)

are owned by shareholders who are often involved in the operation of the business are privately owned by a small number of shareholders

The alternative minimum tax ______. (Select all that apply.)

is intended to ensure that any corporation with substantial economic income pays some minimum level of tax was enacted to combat public perception that large corporations were taking advantage of tax loopholes

A minimum tax credit ______. (Select all that apply.)

can be used in the future when regular tax exceeds tentative minimum tax carryforward is generated whenever a taxpayer pays AMT

The corporate characteristic of______ ______ provides that management decisions are made by a board of directors and corroborate officers acting on behalf of the streets.

centralized management

Double taxation of corporate earnings ______. (Select all that apply.)

creates a tax bias in favor of debt financing to fund corporate operations is a dominant characteristic of the U.S. corporate income tax system

A nonprofit corporation is ______.

liable for corporate income tax only on unrelated business taxable income

Part I of Schedule M-3 ______.

explains the differences between worldwide book income and book income of the corporations included in the consolidated tax return

In terms of the organization of information, Schedule M-1 ______. (Select all that apply.)

groups book/tax differences into broad categories of income-related versus deduction-related differences reports unfavorable book/tax differences on the left-hand side and favorable differences on the right-hand side

The reconciliation between book and taxable income ______. (Select all that apply.)

helps the IRS identify book/tax differences details differences between financial statement income and taxable income

Centralized management ______.

is critical to the efficient operation of public corporations