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Exam 17: Corporations: Introduction and Operating Rules

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Question 41

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

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.

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Question 42

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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) ?

A) $35,000
B) $70,000
C) $77,500
D) $85,000
E) $120,000

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Question 43

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Emerald Corporation,a calendar year C corporation,was formed and began operations on April 1,2015.The following expenses were incurred during the first tax year (April 1 through December 31,2015) of operations. Expenses of temporary directors and of organizational meetings $27,000 Fee paid to the state of incorporation 1,000 Accounting services incident to organization 15,500 Legal services for drafting the corporate charter and bylaws 9,500 Expenses incident to the printing and sale of stock certificates 6,000 Assuming a § 248 election,what is the Emerald's deduction for organizational expenditures for 2015?

Nancy Smith is the sole shareholder and employee of White Corporation,a C corporation that is engaged exclusively in accounting services.During the current year,White has operating income of $320,000 and operating expenses (excluding salary) of $150,000.Further,White Corporation pays Nancy a salary of $100,000.The salary is reasonable in amount and Nancy is in the 33% marginal tax bracket irrespective of any income from White.Assuming that White Corporation distributes all after-tax income as dividends,how much total combined income tax do White and Nancy pay in the current year? (Ignore any employment tax considerations. )

During the current year,Violet,Inc. ,a closely held corporation (not a PSC) ,has $55,000 of passive activity loss,$80,000 of net active income,and $20,000 of portfolio income.How much is Violet's taxable income for the current year?

During the current year,Kingbird Corporation (a calendar year C corporation) had the following income and expenses: Income from operations $200,000 Expenses from operations 140,000 Dividends received (15% ownership) 15,000 Domestic production activities deduction 2,000 On October 1,Kingbird Corporation made a contribution to a qualified charitable organization of $9,000 in cash (not included in any of the above items) .Determine Kingbird's charitable contribution deduction for the current year.

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?

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

Robin Corporation,a calendar year C corporation,had taxable income of $1.9 million,$1.2 million,and $900,000 for 2012,2013,and 2014,respectively.Robin has taxable income of $1.5 million for 2015.The minimum 2015 estimated tax installment payments for Robin are:

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

During the current year,Owl Corporation (a C corporation) ,a retailer of children's apparel,made the following donations to qualified charitable organizations. Adjusted Basis Fair Market Value Children's clothing held as inventory,to Haven for Hope $10,000 $15,000 Stock in Exxon Corporation acquired two years ago and held as an investment,to City University 5,000 ​ 3,000 ​ Land acquired four years ago and held as an investment,to Humane Society 50,000 ​ 75,000 ​ How much qualifies for the charitable contribution deduction (ignoring the taxable income limitation) ?

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?

Pink,Inc. ,a calendar year C corporation,manufactures golf gloves.For the current year,Pink had taxable income (before DPAD) of $900,000,qualified domestic production activities income of $750,000,and W-2 wages related to qualified production activities income of $140,000.Pink's domestic production activities deduction for the current year is:

Orange Corporation owns stock in White Corporation and has net operating income of $400,000 for the year.White Corporation pays Orange a dividend of $60,000.What amount of dividends received deduction may Orange claim if it owns 45% of White stock (assuming Orange's dividends received deduction is not limited by its taxable income) ?

During the current year,Sparrow Corporation,a calendar year C corporation,had operating income of $425,000,operating expenses of $280,000,a short-term capital loss of $10,000,and a long-term capital gain of $25,000.How much is Sparrow's tax liability for the year?

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?

Which of the following statements is incorrect with respect to the treatment of net operating losses by corporations?

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?

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?

Copper Corporation owns stock in Bronze Corporation and has net operating income of $900,000 for the year.Bronze Corporation pays Copper a dividend of $150,000.What amount of dividends received deduction may Copper claim if it owns 85% of Bronze stock (assuming Copper's dividends received deduction is not limited by its taxable income) ?