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Exam 16: Corporate Operations

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Question 31

Multiple Choice

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Remsco has taxable income of $60,000 and a charitable contribution limit modifiedtaxable income of $72,000. Its charitable contributions for the year were $7,500. What isRemsco's current-year charitable contribution deduction and contribution carryover?

A) $7,200 current-year deduction; $300 carryover.
B) $6,000 current-year deduction; $1,500 carryover.
C) $7,500 current-year deduction; $0 carryover.
D) $1,200 current-year deduction; $6,300 carryover.

E) B) and C)
F) B) and D)

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Question 32

True/False

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Corporations calculate adjusted gross income (AGI) in the same way as individuals.

A) True
B) False

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Question 33

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Z Corporation has AMTI of $250,000, which exceeds the AMT exemption phase-out threshold by $100,000. What is Z's tentative minimum tax?

Corporations may carry a net operating loss sustained in the current year back two years and forward 20 years.

It is important to distinguish between temporary and permanent book-tax differences for which of the following reasons?

For book purposes, RadioAircast Inc. reported $15,000 of income from municipal bonds in 2017. It also expensed $12,000 of radio station filing fines paid to the FCC the same year. What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the total adjustment is permanent and what amount is temporary?

In 2014, Smith Traders Inc. reported taxable income of $100,000. In 2015, it reported taxable income of $15,000. In 2016, it reported taxable income of $95,000. In 2017, Smith Tradersexperienced a net operating loss of $25,000. What amount of refund can Smith Traders receive if it does not elect to forgo the carry back (see the Corporate Tax Rate Schedule.) ?

Corporation A receives a dividend from Corporation B. Corporation A includes the dividend in its gross income for tax and financial accounting purposes (no book-tax difference) . If A has accounted for the dividend correctly (following the general rule) , how much of B stock does A own?

Income that is included in book income, but excluded from taxable income, results in afavorable, permanent book-tax difference.

GenerUs Inc.'s board of directors approved a charitable cash contribution to FoodBank, a qualified non-profit organization, in November of 2017. GenerUs made payment to FoodBank on February 2, 2018. GenerUs Inc. (a calendar-year corporation) may claim a deduction for the contribution on its 2017 tax return.

The dividends received deduction cannot cause a net operating loss. The deduction can reduce income to zero but not below zero.

Net operating losses generally create permanent book-tax differences.

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.?

Corporation A receives a dividend from Corporation B. It includes the dividend in gross income for tax purposes but includes a pro-rata portion of B's earnings in its financial accounting income. If A has accounted for the dividend correctly (using the general rule) , how much of B's stock does A own?

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

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

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 threequarters) . What is Omnidata's annual estimated taxable income as of the end of the third quarter?

AR Systems Inc. (AR) had $120,000 of tax liability last year. It anticipates a current-year taxliability of $500,000. Assuming AR is considered a large corporation for purposes of estimating tax liability, what are the minimum estimated tax payments it should make to avoid underpaymentpenalties? Ignore the annualized income method.

Which of the following statements regarding nonqualified stock options (NQOs) isfalse?

An unfavorable temporary book-tax difference is so named because it causes taxableincome to decrease relative to book income.