Question 1

How does a tax loss affect a corporation as it applies to past and future income?

Accepted Answer

Corporations that have net operating losses during a particular year are permitted by the tax laws to apply the losses against any taxable income in other years and thus lower their tax liability. A tax loss may be carried back 2 years against past income or carried forward 20 years to offset future income.

Question 2

Capital losses are

Accepted Answer

A)  taxed at the same marginal rate as ordinary income 
B)  taxed at the 20% rate 
C)  deductible only against capital gains 
D)  used to reduce interest payments 
A)  taxed at the same marginal rate as ordinary income 
B)  taxed at the 20% rate 
C)  deductible only against capital gains 
D)  used to reduce interest payments C

Question 3

Using the rates in Appendix 2A, determine the tax liability of Coastal Inc. in 2010 if the firm had the following stream of taxable income:

Accepted Answer

A)  $83,450 
B)  $ 5,250 
C)  $95,200 
D)  none of the above 
A)  $83,450 
B)  $ 5,250 
C)  $95,200 
D)  none of the above B

Question 4

The marginal tax rate for a firm with taxable income of $105,000 is

Accepted Answer

A)  30% 
B)  39% 
C)  15% 
D)  34% 
A)  30% 
B)  39% 
C)  15% 
D)  34%

Question 5

For most large U.S. corporations, the maximum capital gain tax rate is

Accepted Answer

A)  14% 
B)  35% 
C)  50% 
D)  28% 
A)  14% 
B)  35% 
C)  50% 
D)  28%

Question 6

Explain the difference between average tax rate and marginal tax rate.

Accepted Answer

The average tax rate is calculated by di

Question 7

Last year Cell 2 had a net operating loss of $120,000 and a capital loss of $80,000. This year (2010) the firm has an operating income of $230,000 and a capital gain of $40,000. What is Cell 2's tax liability this year? Assume there are no other tax loss carry backs or carry forwards.

Accepted Answer

A)  $4,500 
B)  $72,950 
C)  $26,150 
D)  $12,500 
A)  $4,500 
B)  $72,950 
C)  $26,150 
D)  $12,500

Question 8

For a corporation with ordinary taxable income of $425,000, what is the additional tax liability if $30,000 in dividends is received from shares it holds in another corporation?

Accepted Answer

A)  $7,140 
B)  $10,200 
C)  $11,700 
D)  $3,060 
A)  $7,140 
B)  $10,200 
C)  $11,700 
D)  $3,060

Question 9

Intercompany dividends, or dividends paid by one corporation to another, are normally entitled to a ____ percent exclusion from Federal income taxes.

Accepted Answer

A)  15 
B)  30 
C)  50 
D)  70 
A)  15 
B)  30 
C)  50 
D)  70

Question 10

____ received by corporations are normally entitled to a 70 percent exclusion from federal income taxes.

Accepted Answer

A)  Capital gains income 
B)  Dividend income 
C)  Loss carrybacks and carryforwards 
D)  none of the above 
A)  Capital gains income 
B)  Dividend income 
C)  Loss carrybacks and carryforwards 
D)  none of the above

Question 11

What is the tax liability in 2010 for a corporation with taxable income of $425,000?

Accepted Answer

A)  $144,500 
B)  $132,750 
C)  $150,250 
D)  $122,700 
A)  $144,500 
B)  $132,750 
C)  $150,250 
D)  $122,700

Question 12

AMX corporation had operating income of $420,000 in 2010; received $12,000 in interest income; paid $22,000 in interest; received $20,000 in dividends; and paid $50,000 in dividends. What is the tax liability for AMX?

Accepted Answer

A)  $141,440 
B)  $146,200 
C)  $148,920 
D)  none of the above 
A)  $141,440 
B)  $146,200 
C)  $148,920 
D)  none of the above

Question 13

A corporation's net operating loss may be carried ____ years and ____ years to offset taxable income in those years.

Accepted Answer

A)  back 20, forward 2 
B)  back 3, forward 5 
C)  back 5, forward 15 
D)  back 2, forward 20 
A)  back 20, forward 2 
B)  back 3, forward 5 
C)  back 5, forward 15 
D)  back 2, forward 20

Question 14

All of the following about taxation of businesses are correct EXCEPT:

Accepted Answer

A)  Business income is taxed at corporate rates. 
B)  Partnerships are taxed at the same rate as the individual owners. 
C)  Partnerships have a special tax table. 
D)  Sole proprietorships are taxed at the same rate as the owner. 
A)  Business income is taxed at corporate rates. 
B)  Partnerships are taxed at the same rate as the individual owners. 
C)  Partnerships have a special tax table. 
D)  Sole proprietorships are taxed at the same rate as the owner.

Question 15

Corporate capital gains income is currently taxed at ____ ordinary income.

Accepted Answer

A)  80 percent of the marginal tax rate on 
B)  the same marginal rate as 
C)  50 percent of the marginal tax rate on 
D)  none of the above 
A)  80 percent of the marginal tax rate on 
B)  the same marginal rate as 
C)  50 percent of the marginal tax rate on 
D)  none of the above

Question 16

BET had a taxable income of $135,000 in 2010. What is its tax liability?

Accepted Answer

A)  $22,500 
B)  $52,650 
C)  $35,900 
D)  $15,900 
A)  $22,500 
B)  $52,650 
C)  $35,900 
D)  $15,900

Question 17

From a tax standpoint, the advantage of an S corporation is that

Accepted Answer

A)  it avoids the double taxation of dividends 
B)  additional depreciation is allowed 
C)  it reduces dividend income 
D)  interest income is not taxed 
A)  it avoids the double taxation of dividends 
B)  additional depreciation is allowed 
C)  it reduces dividend income 
D)  interest income is not taxed

Question 18

Keegan Company had operating income of $740,000 in 2010, received $120,000 in preferred stock dividends, $20,000 in interest income and paid $15,000 in interest expenses. What is the tax liability for Keegan?

Accepted Answer

A)  $265,540 
B)  $294,100 
C)  $299,200 
D)  $270,640 
A)  $265,540 
B)  $294,100 
C)  $299,200 
D)  $270,640

Question 19

How are dividends received by a corporation treated for tax purposes?

Accepted Answer

Corporations that receive dividends are

Exam 28: Taxes

How does a tax loss affect a corporation as it applies to past and future income?

Capital losses are

Using the rates in Appendix 2A, determine the tax liability of Coastal Inc. in 2010 if the firm had the following stream of taxable income:

The marginal tax rate for a firm with taxable income of $105,000 is

For most large U.S. corporations, the maximum capital gain tax rate is

Explain the difference between average tax rate and marginal tax rate.

Last year Cell 2 had a net operating loss of $120,000 and a capital loss of $80,000. This year (2010) the firm has an operating income of $230,000 and a capital gain of $40,000. What is Cell 2's tax liability this year? Assume there are no other tax loss carry backs or carry forwards.

For a corporation with ordinary taxable income of $425,000, what is the additional tax liability if $30,000 in dividends is received from shares it holds in another corporation?

Intercompany dividends, or dividends paid by one corporation to another, are normally entitled to a ____ percent exclusion from Federal income taxes.

____ received by corporations are normally entitled to a 70 percent exclusion from federal income taxes.

What is the tax liability in 2010 for a corporation with taxable income of $425,000?

AMX corporation had operating income of $420,000 in 2010; received $12,000 in interest income; paid $22,000 in interest; received $20,000 in dividends; and paid $50,000 in dividends. What is the tax liability for AMX?

A corporation's net operating loss may be carried ____ years and ____ years to offset taxable income in those years.

All of the following about taxation of businesses are correct EXCEPT:

Corporate capital gains income is currently taxed at ____ ordinary income.

BET had a taxable income of $135,000 in 2010. What is its tax liability?

From a tax standpoint, the advantage of an S corporation is that

Keegan Company had operating income of $740,000 in 2010, received $120,000 in preferred stock dividends, $20,000 in interest income and paid $15,000 in interest expenses. What is the tax liability for Keegan?

How are dividends received by a corporation treated for tax purposes?

The Role and Objective of Financial Management

The Domestic and International Financial Marketplace

Evaluation of Financial Performance

Financial Planning and Forecasting

The Time Value of Money

Fixed Income Securities: Characteristics and Valuation

Common Stock: Characteristics, Valuation, and Issuance

Analysis of Risk and Return

Capital Budgeting and Cash Flow Analysis

Capital Budgeting: Decision Criteria and Real Option Considerations

Capital Budgeting and Risk

The Cost of Capital

Capital Structure Concepts

Capital Structure Management in Practice

Dividend Policy

Working Capital Policy and Short-term Financing

The Management of Cash and Marketable Securities

Management of Accounts Receivable and Inventories

Lease and Intermediate-term Financing

Financing With Derivatives

Risk Management

International Financial Management

Corporate Restructuring

Continuous Compounding and Discounting

Mutually Exclusive Investments Having Unequal Lives

Breakeven Analysis

Bond Refunding Analysis

Filters

A corporation's net operating loss may be carried years and years to offset taxable income in those years.