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


A) Financial-no expense; tax-no deduction
B) Financial-no expense; tax-deduct bargain element at exercise
C) Financial-expense value over vesting period; tax-no deduction
D) Financial-expense value over vesting period; tax-deduct bargain element at exercise

E) None of the above
F) All of the above

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Orange Inc. issued 20,000 nonqualified stock options valued at $40,000 (in total) . The options vest over two years-half in 2016 (the year of issue) and half in 2017. One thousand options are exercised in 2017 with a bargain element on each option of $6. What is the 2017 book-tax difference associated with the stock options?


A) $6,000 unfavorable
B) $6,000 favorable
C) $24,000 unfavorable
D) $24,000 favorable
E) None of these

F) B) and E)
G) A) 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 ($6,000) . What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?


A) $0
B) $2,800
C) $4,200
D) $7,000
E) None of these

F) A) and B)
G) A) and E)

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


A) Corporations are not required to report book-tax differences on their income tax returns.
B) Corporations will eventually recognize the same amount of income for book and tax purposes for income-related temporary book-tax differences.
C) Income excludable for tax purposes usually creates a temporary book-tax difference.
D) None of these is true.

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

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In a given year, Adams Corporation has goodwill impairment in excess of the allowable amortization for tax purposes. Adams has a favorable temporary book-tax difference for that year. Goodwill impairment in excess of tax goodwill creates either a permanent difference or an unfavorable temporary book-tax difference.

A) True
B) False

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The adjusted current earnings (ACE) adjustment is 75% of the difference between a corporation's alternative minimum taxable income before the ACE adjustment and its ACE.

A) True
B) False

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The dividends received deduction is subject to a limitation based on modified taxable income.

A) True
B) False

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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.

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Q1: $30,000, Q2: $220,000, Q3: $125,000,...

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Which of the following statements regarding AMT is true?


A) Only very profitable companies (AMTI greater than $1 million) have their AMT exemption phased out.
B) The AMT exemption is phased out dollar for dollar as AMTI increases.
C) Minimum tax credits are generated whenever regular tax liability exceeds tentative minimum tax.
D) Minimum tax credits can be carried forward indefinitely.

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

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Z Corporation has AMTI of $250,000, which exceeds the AMT exemption phase-out threshold by $100,000. What is Z's tentative minimum tax?


A) $47,000
B) $45,000
C) $40,000
D) $30,000

E) None of the above
F) All of the above

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Pure Action Cycles Inc., a bicycle manufacturer, has a net capital loss in 2016 of $64,000. It had net capital gains of $21,500 in 2015, $45,000 in 2014, $10,000 in 2013 (but suffered a net operating loss in 2013), and $8,000 of net capital gain in 2011. What is the net capital gain in 2015 after the carryback is applied?

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$2,500 cap...

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The rules for consolidated reporting for financial statement purposes are the same as the rules for consolidated reporting for tax purposes. ASC 810 governs consolidated financial reporting while IRC sections 1501-1504 and the accompanying regulations govern income tax consolidation.

A) True
B) False

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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 carryover or carryback 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) A) and B)
F) A) and C)

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


A) It is possible to have no book-tax difference in a year when there is no goodwill amortization for tax purposes.
B) In a year when goodwill is impaired and yet fully amortized for tax purposes (so no tax amortization of the goodwill for that year) , the book-tax difference will be unfavorable.
C) Temporary book-tax differences associated with goodwill are always favorable.
D) If goodwill has been fully amortized for tax purposes in a previous year, the book-tax difference is equal to the amount of impairment recognizeD.It is possible to have an unfavorable difference in a year when goodwill impairment exceeds the allowable amortization deduction.

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

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If a corporation's cash charitable contributions exceed the charitable contribution deduction limit, what kind of book-tax difference is created?


A) Permanent; favorable
B) Permanent; unfavorable
C) Temporary; favorable
D) Temporary; unfavorable

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

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Which of the following statements regarding net operating losses generated in 2016 is true?


A) Corporations can carry net operating losses back two years and forward up to 15 years.
B) A corporation may elect to forgo carrying a net operating loss back and instead carry it over to future years.
C) When a corporation applies a net operating loss carryover, it reports a favorable, permanent book-tax difference in the amount of the applied carryover.
D) Marginal tax rates are irrelevant in determining the tax benefit of applying a net operating loss carryback or carryover.
E) None of these

F) B) and D)
G) A) and D)

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During 2016, Hughes Corporation sold a portfolio of stock it had held for five years at a loss of $200,000. It also sold some investment land and recognized a capital gain of $180,000. In 2014, Hughes reported a net capital gain of $12,000 and in 2015 it recognized a net capital gain of $6,000. What is the amount of its net capital loss carryover to 2017?

Correct Answer

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$2,000, co...

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Which of the following statements regarding charitable contributions is false?


A) Only contributions made to qualified charitable organizations are deductible.
B) Charitable contribution deductions are subject to a limitation based on the corporation's taxable income (before certain deductions) .
C) Corporations can qualify to deduct a contribution before actually paying the contribution to the charity.
D) The amount deductible for non-cash contributions is always the adjusted basis of the property donateD.Depending on the nature of the property, the amount deductible for a contribution can be the fair market value of the contributed property.

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

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Which of the following statements regarding nonqualified stock options (NQOs) is false?


A) If ASC 718 applies, book-tax differences associated with NQOs may be either permanent or temporary.
B) In a given year when ASC 718 applies, if the value of the options that accrue is greater than the bargain element of options exercised, the book-tax difference for that year is unfavorable.
C) Before ASC 718 applied, no expense recognition was required for NQOs for financial accounting purposes.
D) If ASC 718 does not apply, all stock option-related book-tax differences are temporary.

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

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

A) True
B) False

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