M2-Corporate Taxable Income Flashcards
Capital losses offset capital gains. If a corporation has net capital gains, they are taxed at ordinary (corporate) income tax rates. (true or false)
true
The general rule is that the accrual method of accounting will be required by tax shelters, large C Corporations and manufacturers. The IRS has the authority to require that a taxpayer use a method of accounting to accurately reflect the proper income and expenses. (true or false)
true
Personal service corporations are permitted the use of the cash method.
A C Corporation can deduct charitable contributions up to 10% of its taxable income after adding back the dividends-received deduction. (true or false)
true
a corporate charitable deduction that exceeds the limit for deduction in one year can be carried over to the succeeding 5 tax years. It canNOT be carried back.
Only 50% of business meals and entertainment expense is deductible. (true or false)
true
The costs of organizing the corporation are expensable (subject to the $5,000 limitation) and amortizable, but the costs of selling stock are not. (true or false)
true
Legal fees for drafting the corporate charter count.
Professional fees to issue the corporate stock
Commissions paid by corporation to an underwriter
Printing costs to issue the corporate stock
These all relate to the sale of stock.
The penalty for underpayment of federal estimated taxes is not deductible. (true or false)
true
Dividends Received Deduction Percentages
Percentage Ownership Dividends Received Ded
——————————- ————————————
0-20% (“unrelated) 70%
20-80% 80%
80% or more 100%
The deduction is limited to the % of the lesser of dividends received deduction modified taxable income or the dividends received.
Organizational costs are amortizable over a minimum period of 15 years (180 months). In addition, subject to a $50,000 total expenditure limitation, a $5,000 deduction is allowed in year 1. Allowable costs in connection with the corporate organization are legal fees to obtain the corporate charter, necessary accounting services, expenses of temporary directors, and incorporation fees paid to the state. Organizational costs exclude stock issue costs and commissions paid to underwriters to help sell the share. (true or false)
true
For a corporation, a net long-term capital loss is not deductible in the current year (3 year carryback and 5 year carryforward) (true or false)
true
Business gifts are deductible up to a maximum deduction of $25 per recipient per year. (true or false)
true
Under the LIFO method, the inventory on hand at the end of the year is treated as being composed of the earliest acquired goods. (true or false)
true
In periods of rising prices, the LIFO method results in a higher cost of sales and lower taxable income when compared to the FIFO method.
The taxpayer is NOT required to receive permission each year from the IRS to continue the use of the LIFO method.
The LIFO method can be used for tax purposes ONLY if the LIFO method is used for financial statement purposes.
The selection of an accounting method for tax purposes is made on the initial tax return by using the chosen method. (true or false)
True
Unlike individuals, corporations may not deduct any capital losses in excess of capital gains in a year. (true or false)
true
Quality control expenditures are subject to the Uniform Capitalization Rules of Code Sec. 263A. (true or false)
true
Research & development, selling, and advertising are not subject to it and may be currently deducted.
The charitable deduction of a corporation is limited to 10% of its taxable income computed without regard to:
- the contribution deduction
- the dividends received deduction
- net operating loss carryback
- capital loss carryback
