Exam 17: Corporations: Introduction and Operating Rules

For tax years beginning before 2018, the corporate marginal income tax rates ranged from 15% to 39%, while the individual marginal income tax rates ranged from 10% to 39.6%.

Briefly describe the accounting methods available for adoption by a C corporation.

In the current year, Plum Corporation, a computer manufacturer, donated 100 laptop computers to a local university (a qualified educational organization). The computers were constructed by Plum earlier this year, and the university will use the computers for research and research training. Plum's basis in the computers is $35,000, and their fair market value is $120,000. What is Plum's deduction for the contribution of the computers (ignoring the taxable income limitation)?

During the current year, Woodchuck, Inc., a closely held personal service corporation, has $115,000 of net active income, $40,000 of portfolio income, and $135,000 of passive activity loss. What is Woodchuck's taxable income for the current year?

What is the annual required estimated tax payment for a C corporation? What are the rules regarding payment of the estimated tax?

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

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

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

In the current year, Sunset Corporation (a C corporation) had operating income of $200,000 and operating expenses of $175,000. In addition, Sunset had a $30,000 long-term capital gain, a $52,000 short-term capital loss, and $5,000 tax-exempt interest income. What is Sunset Corporation's taxable income for the year?

If a C corporation uses straight-line depreciation on real estate (§ 1250 property), no portion of a recognized gain on the sale of the property will be recaptured as ordinary income.

Rodney, the sole shareholder of Orange Corporation, an accrual method, calendar year corporation, loaned the corporation a substantial amount of money on January 1, 2018. Orange Corporation accrued $45,000 of interest expense on the loan on December 31, 2018. Orange pays the interest to Rodney, a cash basis taxpayer, on January 1, 2019. Based on these facts:

Beige Corporation, a C corporation, purchases a warehouse on August 1, 2002, for $1 million. Straight-line depreciation is taken in the amount of $411,750 before the property is sold on June 12, 2018, for $1.2 million. What is the amount and character of the gain recognized by Beige on the sale of the realty?

A corporation with $5 million or more in assets must file Schedule M-3 (instead of Schedule M-1).

In the current year, Red Corporation (a calendar year C 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 $20,000. Which of the following statements is correct?

A corporation must file a Federal income tax return even if it has no taxable income for the year.

Heron Corporation, a calendar year, accrual basis taxpayer, provides the following information for the current year and asks you to prepare Schedule M-1.

The passive loss rules apply to closely held C corporations and to personal service corporations but not to Scorporations.

A corporate net operating loss arising in 2018 for a calendar year C corporation can be carried back 2 years and forward 20 years to offset taxable income for those years.

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?

Which of the following statements is incorrect regarding the taxation of C corporations for tax years beginning after 2017?