Question 1

What is the purpose of Schedule M-3? Which corporations are required to file Schedule M-3?

Accepted Answer

Schedule M-3 was created,in part,in resp

Question 2

Double taxation of corporate income results because dividend distributions are included in a shareholder's gross income but are not deductible by the corporation.

Accepted Answer

A) True 
 B)False

Question 3

Eagle Company,a partnership,had a short-term capital loss of $10,000 during the current year.Aaron,who owns 25% of Eagle,will report $2,500 of Eagle's short-term capital loss on his individual tax return.

Accepted Answer

A) True 
 B)False

Question 4

Tonya,an actuary,is the sole shareholder of Shrike Corporation,a professional corporation.The corporation paid Tonya a salary of $360,000 during its fiscal year ending September 30,2017.
a.​​​How much salary must Shrike Corporation pay Tonya during the period October 1 through December 31, 2017, to enable the corporation to continue to use its fiscal year without negative tax effects?
b.​If Shrike Corporation had taxable income of $75,000 for the year ending September 30, 2017, what is its tax liability?

Accepted Answer

The answer of Tonya,an actuary,is the sole shareholder of Shrike...

Question 5

On December 28,2017,the board of directors of Taupe Corporation,a calendar year,accrual method C corporation,authorized a contribution of land to a qualified charitable organization.The land (basis of $75,000,fair market value of $125,000) was acquired five years ago and held as an investment.For purposes of the taxable income limitation applicable to charitable deductions,Taupe has taxable income of $800,000 and $950,000 for 2017 and 2018,respectively.Describe the tax consequences to Taupe Corporation under the following independent situations.
a.The donation is made on February 16, 2018.
b.The donation is made on May 11, 2018.

Accepted Answer

In general,charitable contributions are

Question 6

On December 20,2017,the directors of Quail Corporation (an accrual basis,calendar year taxpayer) authorized a cash donation of $5,000 to the American Cancer Society,a qualified charity.The payment,which is made on April 11,2018,may be claimed as a deduction for tax year 2017.

Accepted Answer

A) True 
 B)False

Question 7

Pablo,a sole proprietor,sold stock held as an investment for a $40,000 long-term capital gain.Pablo's marginal tax rate is 33%.Loon Corporation,a C corporation,sold stock held as an investment for a $40,000 long-term capital gain.Loon's marginal tax rate is 35%.What tax rates are applicable to these capital gains?

Accepted Answer

A) 15% rate applies to Pablo and 35% rate applies to Loon. 
B) 15% rate applies to Loon and 33% rate applies to Pablo. 
C) 35% rate applies to Loon and 33% rate applies to Pablo. 
D) 15% rate applies to both Pablo and Loon. 
E) None of the above. 
A) 15% rate applies to Pablo and 35% rate applies to Loon. 
B) 15% rate applies to Loon and 33% rate applies to Pablo. 
C) 35% rate applies to Loon and 33% rate applies to Pablo. 
D) 15% rate applies to both Pablo and Loon. 
E) None of the above.

Question 8

What is a limited liability company? What favorable nontax and tax attributes does the LLC entity form offer taxpayers?

Accepted Answer

Similar to the corporate entity form,a l

Question 9

Grackle Corporation,a personal service corporation,had $230,000 of net active income,$40,000 of portfolio income,and a $250,000 passive activity loss during the year.How much is Grackle's taxable income?

Accepted Answer

A) $20,000 
B) $40,000 
C) $270,000 
D) $520,000 
E) None of the above 
A) $20,000 
B) $40,000 
C) $270,000 
D) $520,000 
E) None of the above

Question 10

Elk,a C corporation,has $370,000 operating income and $290,000 operating expenses during the current year.In addition,Elk has a $10,000 long-term capital gain and a $17,000 short-term capital loss.Elk's taxable income is:

Accepted Answer

A) $63,000. 
B) $73,000. 
C) $80,000. 
D) $90,000. 
E) None of the above. 
A) $63,000. 
B) $73,000. 
C) $80,000. 
D) $90,000. 
E) None of the above.

Question 11

Adrian is the president and sole shareholder of Pigeon Corporation.He also lends money and rents a building to the corporation.Discuss how these business relationships between Adrian and Pigeon Corporation can help avoid double taxation.What limitations are there on the use of such relationships?

Accepted Answer

As president of Pigeon Corporation,Adria

Question 12

Rajib is the sole shareholder of Robin Corporation,a calendar year S corporation.In the current year,Robin earned net profit of $350,000 ($520,000 gross income - $170,000 operating expenses) and distributed $80,000 to Rajib.Rajib must report Robin Corporation profit of $350,000 on his Federal income tax return.

Accepted Answer

A) True 
 B)False

Question 13

No dividends received deduction is allowed unless the corporation has held the stock for more than 90 days.

Accepted Answer

A) True 
 B)False

Question 14

Albatross,a C corporation,had $140,000 net income from operations and a $25,000 short-term capital loss in the current year.Albatross Corporation's taxable income is $140,000.

Accepted Answer

A) True 
 B)False

Question 15

Ivory Corporation,a calendar year,accrual method C corporation,has two cash method,calendar year shareholders who are unrelated to each other.Craig owns 35% of the stock,and Oscar owns the remaining 65%.During 2017,Ivory paid a salary of $100,000 to each shareholder.On December 31,2017,Ivory accrued a bonus of $25,000 to each shareholder.Assuming that the bonuses are paid to the shareholders on February 2,2018,compute Ivory Corporation's 2017 deduction for the above amounts.

Accepted Answer

A) $250,000 
B) $225,000 
C) $200,000 
D) $125,000 
E) None of above 
A) $250,000 
B) $225,000 
C) $200,000 
D) $125,000 
E) None of above

Question 16

For a corporation,the domestic production activities deduction is equal to 9% of the lesser of (1) qualified production activities income or (2) taxable income.However,the deduction cannot exceed 50% of the W-2 wages related to qualified production activities income.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is incorrect regarding the dividends received deduction?

Accepted Answer

A) A corporation must hold stock for more than 90 days in order to qualify for a deduction with respect to dividends on such stock. 
B) The taxable income limitation does not apply with respect to the 100% deduction available to members of an affiliated group. 
C) If a stock purchase is financed 75% by debt, the deduction for dividends on such stock is reduced by 75%. 
D) The taxable income limitation does not apply if the normal deduction (i.e., 70% or 80% of dividends) results in a net operating loss for the corporation. 
E) None of the above. 
A) A corporation must hold stock for more than 90 days in order to qualify for a deduction with respect to dividends on such stock. 
B) The taxable income limitation does not apply with respect to the 100% deduction available to members of an affiliated group. 
C) If a stock purchase is financed 75% by debt, the deduction for dividends on such stock is reduced by 75%. 
D) The taxable income limitation does not apply if the normal deduction (i.e., 70% or 80% of dividends) results in a net operating loss for the corporation. 
E) None of the above.

Question 18

During the current year,Quartz Corporation (a calendar year C corporation) has the following transactions:
​
   
Quartz owns 25% of ABC Corporation's stock.How much is Quartz Corporation's taxable income (loss) for the year?

Accepted Answer

Quartz has an NOL,computed as

Question 19

An expense that is deducted in computing net income per books but not deductible in computing taxable income is a subtraction item on Schedule M-1.

Accepted Answer

A) True 
 B)False

Question 20

Grebe Corporation,a closely held corporation that is not a PSC,had $75,000 of net active income,$60,000 of portfolio income,and a $105,000 passive activity loss during the year.How much of the passive activity loss can Grebe deduct in the current year?

Accepted Answer

A) $0 
B) $60,000 
C) $105,000 
D) $135,000 
E) None of the above 
A) $0 
B) $60,000 
C) $105,000 
D) $135,000 
E) None of the above

Exam 17: Corporations: Introduction and Operating Rules

What is the purpose of Schedule M-3? Which corporations are required to file Schedule M-3?

Double taxation of corporate income results because dividend distributions are included in a shareholder's gross income but are not deductible by the corporation.

Eagle Company,a partnership,had a short-term capital loss of $10,000 during the current year.Aaron,who owns 25% of Eagle,will report $2,500 of Eagle's short-term capital loss on his individual tax return.

On December 20,2017,the directors of Quail Corporation (an accrual basis,calendar year taxpayer) authorized a cash donation of $5,000 to the American Cancer Society,a qualified charity.The payment,which is made on April 11,2018,may be claimed as a deduction for tax year 2017.

What is a limited liability company? What favorable nontax and tax attributes does the LLC entity form offer taxpayers?

Grackle Corporation,a personal service corporation,had $230,000 of net active income,$40,000 of portfolio income,and a $250,000 passive activity loss during the year.How much is Grackle's taxable income?

Elk,a C corporation,has $370,000 operating income and $290,000 operating expenses during the current year.In addition,Elk has a $10,000 long-term capital gain and a $17,000 short-term capital loss.Elk's taxable income is:

Adrian is the president and sole shareholder of Pigeon Corporation.He also lends money and rents a building to the corporation.Discuss how these business relationships between Adrian and Pigeon Corporation can help avoid double taxation.What limitations are there on the use of such relationships?

No dividends received deduction is allowed unless the corporation has held the stock for more than 90 days.

Albatross,a C corporation,had $140,000 net income from operations and a $25,000 short-term capital loss in the current year.Albatross Corporation's taxable income is $140,000.

For a corporation,the domestic production activities deduction is equal to 9% of the lesser of (1) qualified production activities income or (2) taxable income.However,the deduction cannot exceed 50% of the W-2 wages related to qualified production activities income.

Which of the following statements is incorrect regarding the dividends received deduction?

During the current year,Quartz Corporation (a calendar year C corporation) has the following transactions: ​ Quartz owns 25% of ABC Corporation's stock.How much is Quartz Corporation's taxable income (loss) for the year?

An expense that is deducted in computing net income per books but not deductible in computing taxable income is a subtraction item on Schedule M-1.

Grebe Corporation,a closely held corporation that is not a PSC,had $75,000 of net active income,$60,000 of portfolio income,and a $105,000 passive activity loss during the year.How much of the passive activity loss can Grebe deduct in the current year?

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxable Exchanges

Property Transactions, capital Gains and Losses, sec1231, and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganization

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

During the current year,Quartz Corporation (a calendar year C corporation) has the following transactions: Quartz owns 25% of ABC Corporation's stock.How much is Quartz Corporation's taxable income (loss) for the year?