Corp Tax Sims Flashcards
Fully deductible , Partially deductible, Not deductible?
org expenses incurred but no deduction was taken in that yeas
No deductable
Must make the election in the year of inception and begin amortizing in the month the entity commences operation
Fully deductible , Partially deductible, Not deductible?
life insurance premium paid when the corp is NOT the beneficiary
Fully deductible
The insurance policy is considered an employee benefit and therefore are deductible to the corporation.
If the corp is the beneficiary - it is considered a key person policy and the premiums are NOT deductible
Fully deductible , Partially deductible, Not deductible?
vacation pay fully vested incurred during the year and paid in
Fully deductible
accrual based company can deduct accrued vacation, and bonuses that are paid within 2.5 months of the year end
Fully deductible , Partially deductible, Not deductible?
State franchise tax
Fully deductible
This is an ordinary cost of doing business and is deductible
Fully deductible , Partially deductible, Not deductible?
luxury sky boxes
partially deductible
If you rent for a season then you can only deduct the cost of the most expensive seat in the arena
True/False?
the commercial real estate method of arriving at AMT is S/L
True
Real Property is deprecated using S/L for both regular tax and AMT
True/False?
The corp exemption amount reduced the AMT taxable income
True
A corp is allowed an exemption of 40K which reduced AMT
It phases out when a corp’s AMT exceeds 150K and is eliminated at 310K
True/False? The ACE adjustment can be a positive or negative number
True
it can be a negative due to the extent that the positive ACE Adjustment were more than negative adjustment in the past
True/False? depreciation on personal property to arrive at AMT taxable income before ACE adjustment is S/L over MACRS
False
For reg tax - you can use double declining
For AMT - the excessive over 150% is an adjustment that increases to AMTI
True/False?
AMT is the excess of the tentative minimum tax over reg tax liability
True
True/False?
You can include muni interest except for private activity bonds before ACE adjustment
False
no include muni interest income
But yes add back private activity bonds
True/False?
the max amount of corp exemption is 150K
False
the max amount of corp exemption is 40K which is phased out beginning at 150K - 310K
True/False? The 70% DRD is used to calculate ACE
False -
70% is added back to AMTI to determine ACE
the 80% and 100% deductions are available to determine ACE
True/False? Muni interest is included to determine ACE
True
Both muni an private activity income is added back to determine ACE
Interest on private Activity bonds is added back to determine AMTI
True/False? sum of year digit is depreciation method used for personal property to determine ACE
False
ACE used 150% declining balance method
Do loans made to a corporation from a shareholder increase their basis?
No - only in flow through entities is this the case
Amount and increase/decrease taxable income
Reliant’s disbursements included reimbursed employees’ expenses in Year 3 for travel of $100,000, and business meals of $30,000. The reimbursed expenses met the conditions of deductibility and were properly substantiated under an accountable plan. The reimbursement was not treated as employee compensation.
15,000
Increase
Amount and increase/decrease taxable income
Reliant’s books expensed $7,000 in Year 3 for the term life insurance premiums on the corporate officers. Reliant was the policy owner and beneficiary.
7,000
increase
Amount and increase/decrease taxable income
Reliant’s books indicated an $18,000 state franchise tax expense for Year 3. Estimated state tax payments for Year 3 were $15,000.
0
no effect
Amount and increase/decrease taxable income
Book depreciation on computers for Year 3 was $10,000. These computers, which cost $50,000, were placed in service on January 2, Year 3. Tax depreciation used MACRS with the half-year convention. No election was made to expense part of the computer cost, and Reliant elected not to use bonus depreciation.
0 no effect
Computers are 5-year property and are depreciated using the double-declining balance (DDB) method under MACRS for tax purposes. DDB depreciation can be calculated by doubling the straight-line rate of 20% per year (i.e., 1/5); thus, since the half-convention is used and Year 3 is the year the computers were placed in service, depreciation for tax purposes is calculated as 40% × $50,000 cost × 6/12 months = $10,000. This is the same as the depreciation expensed for book purposes, so no adjustment is required on Schedule M-1 to reconcile book net income to taxable income.
Amount and increase/decrease taxable income
For Year 3, Reliant’s books showed a $4,000 short-term capital gain distribution from a mutual fund corporation and a $5,000 loss on the sale of stock that was purchased in Year 1. The stock was an investment in an unrelated corporation. There were no other Year 3 gains or losses and no loss carryovers from prior years.
1000
increase
Amount and increase/decrease taxable income
Reliant’s Year 3 taxable income before the charitable contribution and the dividends received deductions was $500,000. Reliant’s books expensed $15,000 in board of director authorized charitable contributions that were paid on January 5, Year 4. Charitable contributions paid and expensed during Year 3 were $35,000. All charitable contributions were properly substantiated. There were no net operating losses or charitable contributions that were carried forward.
0
no effect
