Exam 17: Corporations: Introduction and Operating Rules

Schedule M-1 of Form 1120 is used to reconcile financial net income with taxable income reported on the corporation's income tax return as follows: net income per books + additions - subtractions = taxable income.Which of the following items is an addition on Schedule M-1?

In connection with the deduction for startup expenditures,comment on the following: ​ a.Qualifying expenditures. b.Election process. c.Amount of deduction.​

A taxpayer is considering the formation of a business that would derive some amounts of tax-exempt interest,qualified dividends,and capital gains.Explain how these income categories would be reported and taxed under the various types of entity forms discussed in the chapter.Consider the tax implications both to the entities and to their owners.

Lilac Corporation incurred $4,700 of legal and accounting fees associated with its incorporation.The $4,700 is deductible as startup expenditures on Lilac's tax return for the year in which it begins business.

Dawn is the sole shareholder of Thrush Corporation,a C corporation.In the current year,Thrush earned $350,000 and distributed $75,000 to Dawn.Kirk is the sole shareholder of Swallow Corporation,an S corporation.In the current year,Swallow earned $350,000 and distributed $75,000 to Kirk.Contrast the tax treatment of Thrush Corporation and Dawn with the tax treatment of Swallow Corporation and Kirk.

During the current year,Coyote Corporation (a calendar year C corporation) has the following transactions: ​ a.​Coyote owns 5% of Roadrunner Corporation's stock. How much is Coyote Corporation's taxable income (loss) for the year? b.Would your answer change if Coyote owned 25% of Roadrunner Corporation's stock?

In the current year,Crimson,Inc.,a calendar C corporation,has income from operations of $180,000 and operating deductions of $225,000.Crimson also had $30,000 of dividends from a 15% stock ownership in a domestic corporation.Which of the following statements is correct with respect to Crimson for the current year?

During the current year,Maroon Company had $125,000 net income from operations.Belinda,the sole owner of Maroon,is in the 33% marginal tax bracket.Determine the combined tax burden for Maroon and Belinda under the following independent situations.(Ignore any employment taxes.) a.Maroon Company is a C corporation and all of its after-tax income is distributed to Belinda. b.Maroon Company is a proprietorship and all of its after-tax income is withdrawn by Belinda. c.Maroon Company is an S corporation and all of its after-tax income is distributed to Belinda.

Red Corporation,which owns stock in Blue Corporation,had net operating income of $200,000 for the year.Blue pays Red a dividend of $40,000.Red takes a dividends received deduction of $28,000.Which of the following statements is correct?

Because of the taxable income limitation,no dividends received deduction is allowed if a corporation has an NOL for the current taxable year.

A calendar year C corporation can receive an automatic 9-month extension to file its corporate return (Form 1120) by timely filing a Form 7004 for the tax year.

Explain the rules regarding the accounting periods available to corporate taxpayers.