Question 1

Which of the following statements is false regarding corporate estimated tax payments?

Accepted Answer

A)   The due dates for estimated tax payments are the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year.
B)   Corporations must pay estimated taxes only if they have a federal income tax liability greater than $10,000 (including the alternative minimum tax) .
C)   Even though a corporation extends its tax return it still must pay its tax liability for the year by two and one half months after year end.
D)   Corporations using the annualized income method for determining estimated tax payments project their tax liability for the year based on income from the first, second, and third quarters.E) A) and D)
F) A) and C)

Question 2

AB Inc. received a dividend from CD Corporation and is able to claim a dividends received deduction without limitation. AB owns 10 percent of CD. What is AB's marginal tax rate (to the nearest tenth of a percent) on the dividends received (after taking the DRD into account) assuming its ordinary marginal tax rate is 34%?

Accepted Answer

10.2% [34%...

Question 3

Controlled group provisions in the tax law prevent taxpayers from splitting a corporation into several smaller corporations to take advantage of low marginal corporate tax rates at low levels of income.

Accepted Answer

A) True 
 B)False

Question 4

IndusTree Inc. received $1,800,000 from the sale of a property in 2014. The property's adjusted basis for regular tax purposes was $200,000 at the time of the sale. The property's adjusted basis for AMT purposes was $290,000. What is the amount of the AMT adjustment due to the sale of the asset? Does it increase or decrease AMTI?

Accepted Answer

$90,000; the gain recognized for regular...

Question 5

The rules for consolidated reporting for financial statement purposes are the same as the rules for consolidated reporting for tax purposes.

Accepted Answer

A) True 
 B)False

Question 6

Rapidpro Inc. had more than $1,000,000 of taxable income two years prior to the current year. It would like to use its prior year tax liability (which was very low but above zero)  to determine its quarterly estimated payments this year. Which of the following statements is true?

Accepted Answer

A)   Rapidpro may use the prior year tax liability to determine its first and second quarter estimated tax payments only since it is a large corporation.
B)   To avoid penalty, the second quarter estimated payment must be large enough to cover 50 percent of its estimated annual tax liability annualized from its first quarter estimated taxable income (assume it does not rely on its current year actual tax liability to determine its estimated tax payment) .
C)   To avoid penalty, the third quarter estimated payment must be large enough to cover 50 percent of its estimated annual tax liability annualized from its third quarter estimated taxable income (assume it does not rely on its current year actual tax liability to determine its estimated tax payment) .
D)   None of these is true.E) B) and D)
F) B) and C)

Question 7

Jazz Corporation owns 50% of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income before the dividend was $100,000. What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Accepted Answer

A)   $0
B)   $7,000
C)   $8,000
D)   $10,000E) All of the above
F) C) and D)

Question 8

The tax rate for the corporate alternative minimum tax is a flat 26%.

Accepted Answer

A) True 
 B)False

Question 9

In 2014, LuxAir Inc. (LA) has book income of $160,000. Included in this figure is income generated from ownership in Jet Repair Corporation (JRC), of which LA owns 30%. JRC has $270,000 in earnings for the year and pays $32,000 in dividends to LA. Assuming accounting for the investment in JRC (income from JRC and the DRD) are its only book-tax differences, what is LA's tax liability for 2014 (see corporate tax schedule)?

Accepted Answer

$17,286, c...

Question 10

Which of the following is unnecessary to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity?

Accepted Answer

A)   Approval of the payment from the board of directors.
B)   Approval from the IRS prior to making the contribution.
C)   Payment made within two and one-half months of the tax year end.
D)   All of these are necessary.E) None of the above
F) A) and B)

Question 11

iScope Inc. paid $3,000 in interest on a loan it used to purchase municipal bonds. What is the nature of the book-tax difference relating to this expense?

Accepted Answer

A)   Permanent; favorable
B)   Permanent; unfavorable
C)   Temporary; favorable
D)   Temporary; unfavorableE) None of the above
F) A) and B)

Question 12

In the current year, FurnitureKing Corporation recognized $32,000 of income from an installment sale it made in a previous tax year. If installment sales are the only difference between ACE and alternative minimum taxable income (before the ACE adjustment) , what is the amount and nature of the ACE adjustment for the current tax year?

Accepted Answer

A)   $24,000 favorable
B)   $24,000 unfavorable
C)   $32,000 favorable
D)   $32,000 unfavorableE) All of the above
F) A) and B)

Question 13

The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not a type of controlled group as defined in the Internal Revenue Code?

Accepted Answer

A)   Parent-subsidiary
B)   Brother-sister
C)   Combined
D)   All of these are types of controlled groups.E) A) and B)
F) All of the above

Question 15

Which of the following is deductible in calculating DRD modified taxable income?

Accepted Answer

A)   Charitable contribution deduction
B)   NOL carrybacks
C)   NOL carryovers
D)   Dividends received deductionE) B) and D)
F) B) and C)

Question 16

For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements regarding book-tax differences associated with purchased goodwill is false?

Accepted Answer

A)   It is possible to have no book-tax difference in a year when there is no goodwill amortization for tax purposes.
B)   In a year when goodwill is impaired and yet fully amortized for tax purposes (so no tax amortization of the goodwill for that year) , the book-tax difference will be unfavorable.
C)   Temporary book-tax differences associated with goodwill are always favorable.
D)   If goodwill has been fully amortized for tax purposes in a previous year, the book-tax difference is equal to the amount of impairment recognized.E) B) and C)
F) A) and B)

Question 18

Which of the following statements regarding incentive stock options (ISOs)  is false?

Accepted Answer

A)   If ASC 718 (a codification of FAS 123R)  does not apply, ISOs do not create book-tax differences.
B)   For ISOs granted when ASC 718 applies, book-tax differences are always unfavorable.
C)   If ASC 718 applies, the value expensed for book purposes in a given year is the value of the options that vest.
D)   If ASC 718 applies, book-tax differences associated with ISOs may be either permanent or temporary.E) A) and C)
F) C) and D)

Question 19

Both Schedules M-1 and M-3 require taxpayers to identify book-tax differences as either temporary or permanent.

Accepted Answer

A) True 
 B)False

Question 20

Omnidata uses the annualized income method to determine its quarterly federal income tax payments. It had $100,000, $50,000, and $90,000 of taxable income for the first, second, and third quarters, respectively ($240,000 in total through the first three quarters) . What is Omnidata's annual estimated taxable income as of the end of the third quarter?

Accepted Answer

A)   $300,000
B)   $320,000
C)   $400,000
D)   $480,000E) None of the above
F) A) and D)

Exam 16: Corporate Operations

Correct Answer
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The tax rate for the corporate alternative minimum tax is a flat 26%.

Correct Answer
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Which of the following statements regarding book-tax differences associated with purchased goodwill is false?

Correct Answer
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Which of the following statements is false regarding corporate estimated tax payments?

Correct Answer
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Correct Answer
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$17,286, c...
View Answer

Controlled group provisions in the tax law prevent taxpayers from splitting a corporation into several smaller corporations to take advantage of low marginal corporate tax rates at low levels of income.

Correct Answer
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Which of the following is deductible in calculating DRD modified taxable income?

Correct Answer
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Rapidpro Inc. had more than $1,000,000 of taxable income two years prior to the current year. It would like to use its prior year tax liability (which was very low but above zero) to determine its quarterly estimated payments this year. Which of the following statements is true?

Correct Answer
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The rules for consolidated reporting for financial statement purposes are the same as the rules for consolidated reporting for tax purposes.

Correct Answer
verified

For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.

Correct Answer
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Jazz Corporation owns 50% of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income before the dividend was $100,000. What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Correct Answer
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Which of the following is unnecessary to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity?

Correct Answer
verified

The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

Correct Answer
verified

Correct Answer
verified
$90,000; the gain recognized for regular...
View Answer

Both Schedules M-1 and M-3 require taxpayers to identify book-tax differences as either temporary or permanent.

Correct Answer
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Correct Answer
verified
10.2% [34%...
View Answer

iScope Inc. paid $3,000 in interest on a loan it used to purchase municipal bonds. What is the nature of the book-tax difference relating to this expense?

Correct Answer
verified

Which of the following statements regarding incentive stock options (ISOs) is false?

Correct Answer
verified

Which of the following is not a type of controlled group as defined in the Internal Revenue Code?

Correct Answer
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Correct Answer
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Exam 16: Corporate Operations

Correct AnswerverifiedShow Answer

The tax rate for the corporate alternative minimum tax is a flat 26%.

Correct AnswerverifiedShow Answer

Which of the following statements regarding book-tax differences associated with purchased goodwill is false?

Correct AnswerverifiedShow Answer

Which of the following statements is false regarding corporate estimated tax payments?

Correct AnswerverifiedShow Answer

Correct Answerverified$17,286, c...View AnswerShow Answer

Controlled group provisions in the tax law prevent taxpayers from splitting a corporation into several smaller corporations to take advantage of low marginal corporate tax rates at low levels of income.

Correct AnswerverifiedShow Answer

Which of the following is deductible in calculating DRD modified taxable income?

Correct AnswerverifiedShow Answer

Rapidpro Inc. had more than $1,000,000 of taxable income two years prior to the current year. It would like to use its prior year tax liability (which was very low but above zero) to determine its quarterly estimated payments this year. Which of the following statements is true?

Correct AnswerverifiedShow Answer

The rules for consolidated reporting for financial statement purposes are the same as the rules for consolidated reporting for tax purposes.

Correct AnswerverifiedShow Answer

For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.

Correct AnswerverifiedShow Answer

Jazz Corporation owns 50% of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income before the dividend was $100,000. What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Correct AnswerverifiedShow Answer

Which of the following is unnecessary to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity?

Correct AnswerverifiedShow Answer

The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

Correct AnswerverifiedShow Answer

Correct Answerverified$90,000; the gain recognized for regular...View AnswerShow Answer

Both Schedules M-1 and M-3 require taxpayers to identify book-tax differences as either temporary or permanent.

Correct AnswerverifiedShow Answer

Correct Answerverified10.2% [34%...View AnswerShow Answer

iScope Inc. paid $3,000 in interest on a loan it used to purchase municipal bonds. What is the nature of the book-tax difference relating to this expense?

Correct AnswerverifiedShow Answer

Which of the following statements regarding incentive stock options (ISOs) is false?

Correct AnswerverifiedShow Answer

Which of the following is not a type of controlled group as defined in the Internal Revenue Code?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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$17,286, c...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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$90,000; the gain recognized for regular...
View Answer

Correct Answer
verified

Correct Answer
verified
10.2% [34%...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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