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Exam 5: Corporate Operations

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Question 51

Multiple Choice

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XPO Corporation has a minimum tax credit of $50,000 from 2017. XPO's tax liability before any MTC carryover is $30,000. What is XPO's minimum tax credit carryover to 2019, if any?

A) $50,000.
B) $20,000.
C) $10,000.
D) $0.

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

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Question 52

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A corporation may carry a net capital loss forward five years to offset capital gains in future years but it may not carry a net capital loss back to offset capital gains in previous years.

A) True
B) False

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Question 53

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In 2018, 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?

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

A corporation may carry a net capital loss back two years and forward 20 years.

For book purposes, RadioAircast Inc. reported $15,000 of income from municipal bonds in 2018. 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?

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

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?

In 2018, LuxAir Inc. (LA) has book income of $160,000. Included in this figure is income generated from ownership in Jet Repair Corporation (JRC), of which LA owns 30%. JRC has $270,000 in earnings for the year and pays $32,000 in dividends to LA. Assuming accounting for the investment in JRC (income from JRC and the DRD) are its only book-tax differences, what is LA's tax liability for 2018? 

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

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

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

Corporations compute their dividends received deduction by multiplying the dividend amount by 10%, 50%, or 100% depending on their ownership in the distributing corporation's stock.

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

Which of the following is not required to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity?

Atom Ventures Inc. (AV) owns stock in the Primo and Faraday corporations. The following summarizes information relating to AV's investment in Primo and Faraday as follows: Assuming that AV follows the general rules for reporting its income from these investments, what is the amount of AV's book-tax difference associated with the investment in these corporations (disregarding the dividends received deduction)? Is it favorable or unfavorable? Is it permanent or temporary?

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

Coop Inc. owns 40% 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) ?

 Netgate Corporation's gross regular tax liability for 2018 was $189,000. What was its taxable income?

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