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Exam 16: Corporate Operations

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Question 61

True/False

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In a given year, Adams Corporation has goodwill impairment in excess of the allowable amortization for tax purposes. It has a favorable temporary book-tax difference for that year.

A) True
B) False

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Question 62

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Coop Inc. owns 40% of Chicken Inc., both Coop and Chicken are corporations. Chicken pays Coop a dividend of $10,000 in 2014. Chicken also reports financial accounting earnings of $20,000 for that year. Assume that Coop follows the general rule of accounting for investment in Chicken. What is the amount and nature of the book-tax difference to Coop associated with the dividend distribution (ignoring the dividends received deduction) ?

A) $2,000 unfavorable
B) $2,000 favorable
C) $10,000 unfavorable
D) $10,000 favorable
E) None of these

F) A) and B)
G) All of the above

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Question 63

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Netgate Corporation's gross regular tax liability for 2014 was $95,375. What was its taxable income?

The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

Remsco has taxable income of $60,000 and a charitable contribution limit modified taxable income of $72,000. Its charitable contributions for the year were $7,500. What is Remsco's current-year charitable contribution deduction and contribution carryover?

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

For book purposes, RadioAircast Inc. reported $15,000 of income from municipal bonds in 2013. It also expensed $12,000 of radio station filing fines paid to the FCC the same year. What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the total adjustment is permanent and what amount is temporary?

Which of the following describes the correct treatment of nonqualified stock options (NQOs) granted when ASC 718 (a codification of FAS 123R) did not apply?

The dividends received deduction cannot cause a net operating loss. The deduction can reduce income to zero but not below zero.

In the current year, Auto Rent Corporation reported the following taxable income at the end of its first, second, and third quarters: $\begin{array} { | l | c | } \hline { \text { Quarter } } & \begin{array} { c } \text { Cumulative } \\\text { Taxable Income }\end{array} \\\hline \text { First } & \$ 1,500,000 \\\hline \text { Second } & \$ 2,800,000 \\\hline \text { Third } & \$ 3,600,000 \\\hline\end{array}$ What amount of estimated tax payments would Auto Rent pay each quarter in order to avoid estimated tax penalties under the annualized income method of computing estimated tax payments?

Tatoo Inc. reported a net capital loss of $13,000 in 2014. It had a net capital gain of $4,300 in 2012 and $3,000 in 2011. In 2013, although the company suffered a net operating loss, it had net capital gains of $1,000. What is the amount of the Tatoo's capital loss carryover remaining after it applies the carryback?

Which of the following statements regarding book-tax differences is true?

Which of the following is not an AMT adjustment?

AR Systems Inc. (AR) had $120,000 of tax liability last year. It anticipates a current-year tax liability of $500,000. Assuming AR is considered a large corporation for purposes of estimating tax liability, what are the minimum estimated tax payments it should make to avoid underpayment penalties? Ignore the annualized income method.

NOL and capital loss carryovers are deductible in calculating the charitable contribution limit modified taxable income, while NOL and capital loss carrybacks are not.

For a corporation, goodwill created in an asset acquisition generally leads to temporary book-tax differences.

Which of the following statements regarding AMT is true?

Net capital loss carryovers but not carrybacks are deductible against capital gains in determining a corporation's net operating loss for the year.

Corporation A receives a dividend from CorporationB. 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?

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