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Exam 5: Corporate Operations

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Question 21

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Tatoo Inc. reported a net capital loss of $13,000 in 2018. The company had a net capital gain of $4,300 in 2016 and $3,000 in 2015. In 2017, although the company suffered a net operating loss, it had net capital gains of $1,000. What is the amount of Tatoo's capital loss carryover remaining after it applies the carryback?

A) $4,700.
B) $5,700.
C) $8,700.
D) $13,000.

E) B) and C)
F) None of the above

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Question 22

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Which of the following statements regarding excess charitable contributions (contributions in excess of the modified taxable income limitation) by corporations is True?

A) Corporations may not carry over or carry back excess charitable contributions.
B) Corporations can carry excess charitable contributions over to a future year or back to a prior year.
C) Corporations can carry excess charitable contributions over to a future year but not back to a prior year.
D) Corporations can carry excess charitable contributions back to a prior year but not over to a future year.

E) B) and D)
F) A) and B)

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Question 23

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TrendSetter Inc. paid $50,000 in premiums for life insurance coverage for its key employees for which TrendSetter Inc. is the beneficiary. What is the nature of the book-tax difference created by this expense?

In 2018, US Sys Corporation received $250,000 in death benefits after its CEO (a key employee) died (it included this amount in book income). For book purposes, US Sys also expensed life insurance premiums for other key employees in the amount of $20,000. In addition, for book purposes, it expensed $10,000 of meals expenditures. What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the book-tax difference is temporary and what amount is permanent?

Although a corporation may report a temporary book-tax difference for an item of income or deduction for a given year, over the long term the total amount of income or deduction it reports with respect to that item will be the same for both book and tax purposes.

In the current year, Auto Rent Corporation reported the following taxable income at the end of its first, second, and third quarters: (Use Exhibit 16-10) What amount of estimated tax payments would Auto Rent pay each quarter to avoid estimated tax penalties under the annualized income method of computing estimated tax payments?

Imperial Construction Inc. (IC) issued 100,000 incentive stock options (ISOs) to its employees on January 1, 2018 with an estimated value of $5.50 per option. The options vest (accrue) at 25 percent per year for four years (beginning in 2018). Each option allows the holder to purchase one share of stock at $8. On January 1, 2019, employees exercised 12,500 options as IC's stock price reached $14.72. What is the amount of the book-tax difference in 2019 associated with the incentive stock options? Is it favorable or unfavorable? Is it temporary or permanent?

Which of the following statements is False regarding consolidated tax returns?

Which of the following statements regarding book-tax differences associated with purchased goodwill is False?

Which of the following regarding Schedule M-1 and Schedule M-3 of Form 1120 is False?

BTW Corporation has taxable income in the current year that can be offset with an NOL carryover from a previous year. What is the nature of the book-tax difference created by the net operating loss carryover deduction in the current year?

Which of the following statements regarding incentive stock options (ISOs) is False?

AmStore Inc. sold some of its heavy machinery at a gain. AmStore used the straight-line method for financial accounting depreciation and expensing for tax cost-recovery. If accumulated depreciation for financial accounting purposes is less than accumulated depreciation for tax reporting purposes, what is the nature of the book-tax difference associated with the gain on the sale?

In 2018, Datasoft Inc. received $350,000 in dividends from CSLabs Inc. Datasoft's taxable income before the dividends received deduction and $20,000 charitable contribution deduction is $300,000. What is Datasoft's DRD assuming it owns 15% of the CSLabs Inc. stock?

Minimum tax credits generated by the pre-2018 corporate alternative minimum tax can be carried forward to offset regular tax in post-2017 years.

Bingo Corporation incurred a $10 million net operating loss in 2019. Bingo reported taxable income of $12 million in 2020. Bingo can offset the entire $10 million NOL carryover against taxable income in 2020.

An affiliated group must file a consolidated tax return.

iScope Inc. paid $3,000 in interest on a loan it used to purchase municipal bonds. What is the nature of the book-tax difference relating to this expense?

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

For Corporation P to file a consolidated tax return with Corporation S, P must own what percentage of P's voting stock?