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Corporation A receives a dividend from Corporation B. It includes the dividend in gross income for tax purposes but includes a pro-rata portion of B's earnings in its financial accounting income. If A has accounted for the dividend correctly (using the general rule) , how much of B's 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) B) and D)
F) C) and D)

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Which of the following is deductible in calculating DRD modified taxable income?


A) Charitable contribution deduction.
B) Net capital loss carrybacks.
C) NOL carryovers.
D) Dividends received deduction.

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

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In 2019, Carbonfab Manufacturers Inc. expensed $125,000 of depreciation for book purposes, but for tax purposes, it deducted $179,000. Carbonfab also sold equipment for $500,000. The book-adjusted basis of the equipment sold was $350,000, while the adjusted basis for tax purposes was $210,000. What is the total book-tax difference associated with depreciation and the gain on sale? Is it favorable or unfavorable? What amount of the book-tax difference is permanent and what amount is temporary?

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$86,000, unfavorable...

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


A) 100 percent.
B) 80 percent.
C) More than 50 percent.
D) 50 percent or more.

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

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

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Which of the following describes the correct treatment of incentive stock options (ISOs) ?


A) Financial accounting-no expense; tax-no deduction.
B) Financial accounting-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) B) and C)
F) None of the above

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For 2019, accrual-method corporations cannot deduct charitable contributions until they actually make payment to the charity.

A) True
B) False

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Corporations may carry a net operating loss sustained in 2019 back two years and forward 20 years.

A) True
B) False

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


A) ISO-related compensation expense creates permanent book-tax differences.
B) Book-tax differences related to ISO-related compensation expense are always unfavorable.
C) The ISO-related compensation expense is recorded for book purposes as the ISO vests.
D) Book-tax differences associated with ISO-related compensation expenses can be either permanent or temporary.

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

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For corporations, which of the following regarding net capital losses is true?


A) A corporation that experiences a net capital loss has a favorable book-tax difference in the year of the loss.
B) A corporation that experiences a net capital loss in Year 4 first carries the loss back to Year 3, then Year 2, and then Year 1 before carrying it forward.
C) Net capital loss carrybacks are deductible in determining a corporation's net operating loss.
D) Net capital loss carrybacks and carryovers create temporary book-tax differences if they are used before they expire.

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

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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 the choices are correct.

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

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Net capital loss carryovers are deductible against capital gains in determining a corporation's net operating loss for the year.

A) True
B) False

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Which of the following does NOT create a permanent book-tax difference?


A) Organizational and start-up expenses.
B) Key employee death benefit income.
C) Fines and penalties expenses.
D) Municipal bond interest income.

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

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In January 2019, Khors Company issued nonqualified stock options to its CEO, Jenny Svaro. Because the company does not expect Ms. Svaro to leave the company, the options vest at the time they are granted with a total value of $50,000. In December of 2019, the company experienced a surge in its stock price, and Ms. Svaro exercises the options. The total bargain element at the time of exercise is $40,000. For 2019, what is the nature of the book-tax difference due to the options exercised?


A) Favorable and temporary.
B) Favorable and permanent.
C) Unfavorable and temporary.
D) Unfavorable and permanent.
E) Not enough information to determine.

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

Correct Answer

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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 B)
F) A) and C)

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Which of the following does NOT create a temporary book-tax difference?


A) Deferred compensation.
B) Bad-debt expense.
C) Depreciation expense.
D) Dividends received deduction.

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

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Net operating losses generally create permanent book-tax differences.

A) True
B) False

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In 2019, Webtel Corporation donated $50,000 to a qualifying charity. For the year, it reported taxable income of $310,000, which included the following: the $50,000 charitable contribution (before limitation), a $100,000 dividends received deduction, and a $20,000 net operating loss carryover. What is Webtel Corp.'s charitable contribution deduction?

Correct Answer

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$46,000, c...

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A corporation may carry a net capital loss back three years and forward five years.

A) True
B) False

Correct Answer

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WFO Corporation has gross receipts according to the following schedule: WFO Corporation has gross receipts according to the following schedule: If WFO began business as a cash-method corporation in Year 1, in which year would it have first been required to use the accrual method? A) Year 3. B) Year 4. C) Year 5. D) Year 6. E) None of the choices are correct. If WFO began business as a cash-method corporation in Year 1, in which year would it have first been required to use the accrual method?


A) Year 3.
B) Year 4.
C) Year 5.
D) Year 6.
E) None of the choices are correct.

F) C) and D)
G) B) and C)

Correct Answer

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Showing 21 - 40 of 106

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