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Exam 16: Corporate Operations

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Question 1

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In 2016, Webtel Corporation donated $50,000 to a qualifying charity. For the year, it reported taxable income of $310,000, which included the following: the $50,000 charitable contribution (before limitation), a $100,000 dividends received deduction, and a $20,000 net operating loss carryover. What is Webtel Corp.'s charitable contribution deduction?

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$46,000, c...

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Question 2

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Jazz Corporation owns 10% of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before the dividend was ($2,000) . What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

A) $0
B) $5,600
C) $7,000
D) $8,000
E) None of these.

F) B) and E)
G) All of the above

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Question 3

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A nonqualified stock option will create a permanent book-tax difference in a given year if it accrues during the year but is exercised in a later year.

What is the unextended due date of the tax return of a calendar-year corporation for 2016?

Which of the following is not an acceptable method of determining the required annual payment of federal income tax for corporations?

Taxable income of the most profitable corporations is subject to a flat 35% tax rate.

Atom Ventures Inc. (AV) owns stock in the Primo and Faraday corporations. The following summarizes information relating to AV's investment in Primo and Faraday as follows: Assuming that AV follows the general rules for reporting its income from these investments, what is the amount of AV's book-tax difference associated with the investment in these corporations (disregarding the dividends received deduction)? Is it favorable or unfavorable? Is it permanent or temporary?

QDP Corporation's AMTI is $569,000 for 2015. Its regular tax liability is $110,000. What is its AMT?

Which of the following statements regarding the dividends and/or the dividends received deduction (DRD) is true?

Small corporations (in terms of average annual gross receipts) are exempt from the alternative minimum tax.

In January 2015, Khors Company issues nonqualified stock options to its CEO, Jenny Svaro. Because the company does not expect Ms. Svaro to leave the company, the options vest at the time they are granted with a total value of $50,000. In December of 2016, the company experiences a surge in its stock price, and Ms. Svaro exercises the options. The total bargain element at the time of exercise is $60,000. For 2016, what is the book-tax difference due to the options exercised?

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?

Which of the following does NOT create a permanent book-tax difference?

BTW Corporation has taxable income in the current year that can be offset with an NOL from a previous year. What is the nature of the book-tax difference created by the net operating loss carryover deduction in the current year?

A corporation may carry a net capital loss back three years and forward five years.

NOL and capital loss carryovers are deductible in calculating the charitable contribution limit modified taxable income, while NOL and capital loss carrybacks are not.

Large corporations are allowed to use the cash method of accounting for at least the first two years of their existence.

ValuCo gives you the following information: What is its ACE adjustment for the year? Is it favorable or unfavorable?

Corporations may carry excess charitable contributions forward five years, but they may not carry them back.

Corporations compute their dividends received deduction by multiplying the dividend amount by 10%, 50%, or 100% depending on their ownership in the distributing corporation's stock.