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Exam 16: Corporate Operations

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Question 41

Multiple Choice

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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 B)
F) B) and D)

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Question 42

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A C corporation reports its taxable income or loss on Form 1065.

A) True
B) False

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Question 43

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In 2019,US Sys Corporation received $250,000 in death benefits after its CEO (a key employee)died (it included this amount in book income).For book purposes,US Sys also expensed life insurance premiums for other key employees in the amount of $20,000.In addition,for book purposes,it expensed $10,000 of business meals expenditures.What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the book-tax difference is temporary and what amount is permanent?

Coop Inc.owns 40 percent of Chicken Inc.Both Coop and Chicken are corporations.Chicken pays Coop a dividend of $10,000 in the current year.Chicken also reports financial accounting earnings of $20,000 for that year.Assume 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) ?

For tax purposes,a corporation may deduct the entire amount of a net capital loss in the year incurred.

An unfavorable temporary book-tax difference is so named because it causes taxable income to decrease relative to book income.

Which of the following describes the correct treatment of the exercise of nonqualified stock options (NQOs) ?

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

The rules for consolidated reporting for financial statement purposes are the same as the rules for consolidated reporting for tax purposes.

During 2019,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 2017,Hughes reported a net capital gain of $12,000 and in 2018 it recognized a net capital gain of $6,000.What is the amount of its net capital loss carryover to 2020?

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

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

Corporations are not allowed to deduct charitable contributions in excess of 10 percent of the corporation's taxable income (before the charitable contribution and certain other deductions).

For tax purposes,companies using nonqualified stock options deduct expenses in the year the options are exercised.

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

In general,all C corporations can elect to use either the accrual or cash method of accounting.

Jazz Corporation owns 50 percent of the Williams Corp.stock.Williams distributed a $10,000 dividend to Jazz Corporation.Jazz Corp.'s taxable income before the dividend was $100,000.What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

In 2019,Datasoft Inc.received $350,000 in dividends from CSLabs Inc.Datasoft's taxable income before the dividends received deduction and $20,000 charitable contribution deduction is $300,000.What is Datasoft's DRD assuming it owns 15 percent of the CSLabs Inc.stock?

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

TrendSetter Inc.paid $50,000 in premiums for life insurance coverage for its key employees for which TrendSetter Inc.is the beneficiary.What is the nature of the book-tax difference created by this expense?