Question 1

Income that is included in net income per books but not included in taxable income is an addition item on Schedule M-1.

Accepted Answer

A) True 
 B)False

Question 2

Azul Corporation,a personal service corporation,had $300,000 of active income,$40,000 of portfolio income,and a $190,000 passive loss during the year.How much is Azul's taxable income?

Accepted Answer

A) $340,000. 
B) $300,000. 
C) $150,000. 
D) $110,000. 
E) None of the above. 
A) $340,000. 
B) $300,000. 
C) $150,000. 
D) $110,000. 
E) None of the above.

Question 3

As a general rule,a personal service corporation (PSC)must use a fiscal year as its accounting period.

Accepted Answer

A) True 
 B)False

Question 4

During the current year,Yellow Company had operating income of $380,000 and operating expenses of $300,000.In addition,Yellow had a long-term capital loss of $50,000.Based on this information,how does Alexandria,the sole owner of Yellow Company,report this information on her individual income tax return under following assumptions?

Accepted Answer

The answer of During the current year,Yellow Company had operating...

Question 5

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 6

Schedule M-1 is used to reconcile unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at the end of the year.

Accepted Answer

A) True 
 B)False

Question 7

Starling Corporation,a closely held personal service corporation,has $150,000 of active income,$60,000 of portfolio income,and a $165,000 passive loss during the year.How much of the passive loss can Starling deduct in the current year?

Accepted Answer

A) $0. 
B) $60,000. 
C) $150,000. 
D) $165,000. 
E) None of the above. 
A) $0. 
B) $60,000. 
C) $150,000. 
D) $165,000. 
E) None of the above.

Question 8

Macayo,Inc. ,received $800,000 life insurance proceeds on the death of its president.The $800,000 will be a subtraction item on Macayo's Schedule M-1.

Accepted Answer

A) True 
 B)False

Question 9

In the current year,Plum Corporation,a computer manufacturer,donated 100 laptop computers to a local school district (a qualified educational organization).The computers were constructed by Plum earlier this year,and the school district allocated the computers among its various schools where they will be used for educational purposes.Plum's basis in the computers is $70,000,and their fair market value is $250,000.What is Plum's deduction for the contribution of the computers (ignoring the taxable income limitation)?

Accepted Answer

A) $70,000. 
B) $140,000. 
C) $160,000. 
D) $250,000. 
E) None of the above. 
A) $70,000. 
B) $140,000. 
C) $160,000. 
D) $250,000. 
E) None of the above.

Question 10

C corporations can elect fiscal years that are different from those of their shareholders,but personal service corporations (PSCs)are subject to substantial restrictions in the choice of a fiscal year.Why are the fiscal year choices of PSCs limited?

Accepted Answer

The shareholder-employees in a PSC are l

Question 11

Which of the following statements is correct regarding the taxation of C corporations?

Accepted Answer

A) The alternative minimum tax does not apply. 
B) A corporation with taxable income of less than $500 need not file a tax return. 
C) The due date for a corporate income tax return (ignoring extensions)is the fifteenth day of the third month following the close of the corporation's tax year. 
D) In general,the required annual payment for corporate estimated taxes is 90% of the corporation's final tax for the current year. 
E) None of the above. 
A) The alternative minimum tax does not apply. 
B) A corporation with taxable income of less than $500 need not file a tax return. 
C) The due date for a corporate income tax return (ignoring extensions)is the fifteenth day of the third month following the close of the corporation's tax year. 
D) In general,the required annual payment for corporate estimated taxes is 90% of the corporation's final tax for the current year. 
E) None of the above.

Question 12

Peach Corporation had $210,000 of active income,$45,000 of portfolio income,and a $230,000 passive loss during the year.If Peach is a closely held C corporation that is not a PSC,it can deduct $210,000 of the passive loss in the year.

Accepted Answer

A) True 
 B)False

Question 13

Unlike individual taxpayers,corporate taxpayers do not receive a preferential tax rate with respect to long-term capital gains.

Accepted Answer

A) True 
 B)False

Question 14

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?

Accepted Answer

A) Charitable contributions carryover from previous year. 
B) Proceeds of life insurance paid on death of key employee. 
C) Charitable contributions in excess of deductible limits. 
D) Tax-exempt interest. 
E) None of the above. 
A) Charitable contributions carryover from previous year. 
B) Proceeds of life insurance paid on death of key employee. 
C) Charitable contributions in excess of deductible limits. 
D) Tax-exempt interest. 
E) None of the above.

Question 15

A corporation with $10 million or more in assets must file Schedule M-3 (instead of Schedule M-1).

Accepted Answer

A) True 
 B)False

Question 16

On April 8,2010,Oriole Corporation donated a painting worth $75,000 to the Texas Art Museum,a qualified public charity.The museum included the painting in its permanent collection.Oriole Corporation purchased the painting 5 years ago for $25,000.Oriole's charitable contribution deduction is $25,000 (ignoring the taxable income limitation).

Accepted Answer

A) True 
 B)False

Question 17

Ted is the sole shareholder of a C corporation,and Sue owns a sole proprietorship.Both businesses were started in 2010,and each business sustained a $5,000 net capital loss for the year.Which of the following statements is correct?

Accepted Answer

A) Ted's corporation can deduct the $5,000 capital loss in 2010. 
B) Ted's corporation can deduct $3,000 of the capital loss in 2010. 
C) Sue can carry the capital loss back three years and forward five years. 
D) Sue can deduct the $5,000 capital loss against ordinary income in 2010. 
E) None of the above. 
A) Ted's corporation can deduct the $5,000 capital loss in 2010. 
B) Ted's corporation can deduct $3,000 of the capital loss in 2010. 
C) Sue can carry the capital loss back three years and forward five years. 
D) Sue can deduct the $5,000 capital loss against ordinary income in 2010. 
E) None of the above.

Question 18

Grocer Services Corporation (a calendar year taxpayer),a wholesale distributor of food,made the following donations to qualified charitable organizations during the year:   How much qualifies for the charitable contribution deduction?

Accepted Answer

A) $15,000. 
B) $16,850. 
C) $17,250. 
D) $19,450. 
E) None of the above. 
A) $15,000. 
B) $16,850. 
C) $17,250. 
D) $19,450. 
E) None of the above.

Question 19

Compare the basic tax and nontax factors of doing business as a partnership,an S corporation,and a C corporation.Circle the correct answers.

Accepted Answer

The correc

Question 20

Nicole owns and operates a sole proprietorship.She is considering incorporating the business as a C corporation and has asked you to explain how a corporate tax return differs from the return for a sole proprietorship.In addition,she has asked you to explain the nontax factors that she should consider in deciding whether to incorporate her business.

Accepted Answer

Differences between a proprietorship and

Exam 17: Corporations: Introduction and Operating Rules

Income that is included in net income per books but not included in taxable income is an addition item on Schedule M-1.

Azul Corporation,a personal service corporation,had $300,000 of active income,$40,000 of portfolio income,and a $190,000 passive loss during the year.How much is Azul's taxable income?

As a general rule,a personal service corporation (PSC)must use a fiscal year as its accounting period.

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?

Schedule M-1 is used to reconcile unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at the end of the year.

Starling Corporation,a closely held personal service corporation,has $150,000 of active income,$60,000 of portfolio income,and a $165,000 passive loss during the year.How much of the passive loss can Starling deduct in the current year?

Macayo,Inc. ,received $800,000 life insurance proceeds on the death of its president.The $800,000 will be a subtraction item on Macayo's Schedule M-1.

C corporations can elect fiscal years that are different from those of their shareholders,but personal service corporations (PSCs)are subject to substantial restrictions in the choice of a fiscal year.Why are the fiscal year choices of PSCs limited?

Which of the following statements is correct regarding the taxation of C corporations?

Peach Corporation had $210,000 of active income,$45,000 of portfolio income,and a $230,000 passive loss during the year.If Peach is a closely held C corporation that is not a PSC,it can deduct $210,000 of the passive loss in the year.

Unlike individual taxpayers,corporate taxpayers do not receive a preferential tax rate with respect to long-term capital gains.

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?

A corporation with $10 million or more in assets must file Schedule M-3 (instead of Schedule M-1).

Ted is the sole shareholder of a C corporation,and Sue owns a sole proprietorship.Both businesses were started in 2010,and each business sustained a $5,000 net capital loss for the year.Which of the following statements is correct?

Grocer Services Corporation (a calendar year taxpayer),a wholesale distributor of food,made the following donations to qualified charitable organizations during the year: How much qualifies for the charitable contribution deduction?

Compare the basic tax and nontax factors of doing business as a partnership,an S corporation,and a C corporation.Circle the correct answers.

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

Part 1--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Part 2--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses,1231,and Recapure Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Distributions in Complete Liquidation and an Overview of Reorganizations

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