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Tatoo Inc. reported a net capital loss of $13,000 in 2016. It had a net capital gain of $4,300 in 2014 and $3,000 in 2013. In 2015, 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) A) and D)
F) B) and D)

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TerraWise Inc. reported the following information for 2016:  Regular taxable income $5,620,000 Regular depreciation $810,000 ATM depreciation $570,000 Adjusted basis of equipment sold - Regular $100,000 Adjusted basis of equipment sold - AMT $140,000 Income from a private-activity municipal bond issued in 2006 $45,000 Unfavorable ACE adjustment $35,000\begin{array} { | l | r | } \hline \text { Regular taxable income } & \$ 5,620,000 \\\hline \text { Regular depreciation } & \$ 810,000 \\\hline \text { ATM depreciation } & \$ 570,000 \\\hline \text { Adjusted basis of equipment sold - Regular } & \$ 100,000 \\\text { Adjusted basis of equipment sold - AMT } & \$ 140,000 \\\hline \text { Income from a private-activity municipal bond issued in 2006 } & \$ 45,000 \\\hline \text { Unfavorable ACE adjustment } & \$ 35,000 \\\hline\end{array} $5,900,000, computed as follows: What is TerraWise Inc.'s AMTI?

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blured image $5,900,00...

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Which of the following is not calculated in the corporate income tax formula?


A) Gross income
B) Adjusted gross income
C) Taxable income
D) Regular tax liability

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

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Corporation A receives a dividend from Corporation B. Corporation A includes the dividend in its gross income for tax and financial accounting purposes (no book-tax difference) . If A has accounted for the dividend correctly (following the general rule) , how much of B stock does A own?


A) A owns less than 20 percent of the stock of B
B) A owns at least 20 but not more than 50 percent of the stock of B
C) A owns more than 50 percent of the stock of B
D) Cannot be determined

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

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Jazz Corporation owns 10% of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before the dividend was ($2,000) . What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?


A) $0
B) $5,600
C) $7,000
D) $8,000
E) None of these

F) C) and D)
G) A) and C)

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


A) In general, smaller corporations are required to complete Schedule M-1 while larger corporations are required to complete Schedule M-3.
B) Schedule M-3 lists more book-tax differences than Schedule M-1.
C) Both Schedules M-1 and M-3 reconcile to a corporation's bottom line taxable income.
D) Schedule M-1 does not distinguish between temporary and permanent book-tax differences whereas Schedule M-3 does.

E) B) and D)
F) B) and C)

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In general, a corporation can elect to use either the accrual or cash method of accounting no matter how large the corporation. Large corporations (average gross receipts exceeding $5 million over the prior three years) are required to use the accrual method.

A) True
B) False

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In 2016, AutoUSA Inc. received $4,600,000 of book income, including $20,000 of interest income from tax-exempt municipal bonds. AutoUSA reported $3,600,000 of regular business expenses. If it made $350,000 of estimated tax payments (prepayments) throughout the tax year, what is its tax due or tax refund when it files its return? Assume AutoUSA pays taxes at a flat 34 percent rate and disregard the alternative minimum tax.

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Which of the following statements is false regarding corporate estimated tax payments?


A) The due dates for estimated tax payments are the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year.
B) Corporations must pay estimated taxes only if they have a federal income tax liability greater than $10,000 (including the alternative minimum tax) .
C) Even though a corporation extends its tax return, it still must pay its tax liability for the year by three and one-half months after year-end.
D) Corporations using the annualized income method for determining estimated tax payments project their tax liability for the year based on income from the first, second, and third quarters.

E) All of the above
F) A) and D)

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On January 1, 2014, Credit Inc. recorded goodwill valued at $270,000 when it acquired the assets of another company. At the end of 2015, the auditors of Credit Inc. determined that the goodwill had been impaired by $50,000 and Credit Inc. wrote down the book value of the goodwill by $50,000. During 2016, the goodwill was not further impaired. In 2017, additional goodwill was impaired and was written down another $18,000 for financial reporting purposes. What is the temporary book-tax difference associated with the purchased goodwill in 2015, 2016, and 2017? Are the differences favorable or unfavorable? Are the differences permanent or temporary?

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2015: $32,000 unfavorable, tem...

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Small corporations (in terms of average annual gross receipts) are exempt from the alternative minimum tax.

A) True
B) False

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Netgate Corporation's gross regular tax liability for 2016 was $95,375. What was its taxable income?

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Which of the following statements regarding the alternative minimum tax is false?


A) Corporations compute the AMT by multiplying their AMT base by 35% and subtracting their regular tax liability.
B) Small corporations are exempt from the AMT.
C) All first-year corporations are exempt from the AMT.
D) None of these is false (choose if you believe All of these above statements are true) .

E) All of the above
F) B) and D)

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Corporations may carry excess charitable contributions forward five years, but they may not carry them back.

A) True
B) False

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


A) An affiliated group can file a consolidated tax return only if it elects to do so.
B) To file a consolidated tax return, one corporation must own at least 50% of the stock of another corporation.
C) For a group of corporations filing a consolidated tax return, an advantage is that losses of one group member may offset gains of another group member.
D) For a group of corporations filing a consolidated tax return, losses from certain intercompany transactions are deferred until realized through a transaction outside of the group.

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

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Which of the following statements regarding controlled groups is false?


A) The purpose of the controlled group rules is to essentially treat the group as though it were one entity for purposes of determining certain tax benefits.
B) Having several entities treated as a controlled group is advantageous for tax purposes because each corporation in the group is allowed to use the 15% tax bracket in the corporate tax rate schedule in computing its regular income tax liability.
C) Lauren owns 100% of Corporation A stock and 100% of Corporation B stock. Corporation A and Corporation B form a controlled group.
D) Corporation A owns 100% of Corporation B. Corporation A and Corporation B form a controlled group.

E) None of the above
F) A) and D)

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For 2016, SRH's taxable income is $35,000 and JHH's taxable income is $45,000. Together, Scott and Jackson Howard own 100 percent of both corporations. What is the combined tax liability of the two corporations?

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$15,450
Explanation: SRC and JHH are a b...

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


A) Net capital loss carrybacks
B) NOL carrybacks
C) NOL carryovers
D) Charitable contributions

E) A) and B)
F) A) and C)

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Which of the following statements regarding the dividends and/or the dividends received deduction (DRD) is true?


A) Dividends are taxed at preferential rates for corporations as well as for individuals.
B) The DRD can increase the net operating loss of a corporation.
C) Corporations are allowed to deduct from a dividend received the product of the dividend and the percentage of the receiving corporation's ownership in the distributing corporation's stock.
D) The DRD allows corporations to deduct the amount of dividends that they distribute.

E) All of the above
F) A) and D)

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Minimum tax credits generated by the corporate AMT can be carried forward indefinitely.

A) True
B) False

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