Mod 38 Wrong Answers Flashcards
For a corporation to be exempt from AMT in 2nd year it’s…
First year’s gross receipts must be $5 million or less
For a corporation to be exempt from AMT in its 3rd year it’s…
Average gross receipts must be $7.5 or less for years 1 and 2
What is the portion of dividends received that is included in taxable income when a corporation is computing its maximum allowable deduction for charitable contributions?
Full amount of dividends received is included
In determining the NOL for 2013, given that deductions in the tax return exceed gross income, the dividends received deduction will be…
Fully allowed (no change necessary)
In determining the NOL for 2013, given that deductions in the tax return exceed gross income, the NOL deduction carryover from 2012 will…
Not be allowed and must be subtracted from the excess deductions
To reconcile book income to taxable income, interest paid on loan to purchase municipal bonds is…2
1 not deductible on the tax return
2 must be added back to arrive at taxable income
Schedule M-1 reconciles to taxable income before…2
1 dividends received deduction
2 NOL deduction
Dividends received deduction will not be reconciling item on…
Schedule M-1
On Schedule M-1, the $2,000 of interest expense incurred to carry municipal bonds is…2
1 not deductible
2 must be added back to book income
For a parent to qualify for filing of consolidated returns, at least what % of voting stock and total stock must the parent own of the sub?
80% voting
80% total
The election to file consolidated returns is limited to…
Affiliated corporations
Affiliated corporations are parent subsidiary corporations that are connected through stock ownership wherein at least 80% combined voting power and value all of stock is directly owned by…
Other includible corporations
If accumulated earnings is -$50,000 as of December 31, 2012. And current earnings for 2013 is $5,000, with a $15,000 cash distribution made to shareholders. What amount is taxable to shareholders as a dividend?
$5,000
Distributions of property to shareholders reduce E&P by the greater of…2
1 property’s adjusted basis or
2 FMV at date of distribution
What affect does gain recognized have on E&P?
Increases E&P
When a corporation distributes a liability to a shareholder, what affect does it have on E&P?
Increases E&P
General expenses incurred in the complete liquidation and dissolution of a corporation are…2
1 deductible by corporation as
2 ordinary and necessary business expenses
General expenses in a complete liquidation of a corporation include…3
1 filing fees
2 professional fees
3 other liquidation expenditures
When a parent corporation liquidated its 80% or more owned subsidiary, the parent corporation as a stockholder will ordinarily…
Not recognize gain or loss on receipt of liquidating distributions
From its sub
No gain or loss will be recognized by a parent corp on receipt of property in…
Complete liquidation of 80% owned sub
Adjustments which can be deducted from taxable income to arrive at corporation’s undistributed personal holding company income include…
Deduction for net long term capital gain which federal taxes can
Be subtracted from
Maximum amount of taxable income that would be exposed to Accumulated Earnings Tax calculation
Taxable income 2014 - income tax 2014 - minimum AEC
PHC tax should be…
Self-assessed
PGC tax should be self assessed by filing a separate…
Form 1120-PH
The personal holding company tax may be imposed if at least 60% of the corporation’s adjusted ordinary gross income for the year is…
2) and what test is met?
Personal holding company income
2) stock ownership test is met
Personal holding company tax is a penalty tax imposed…
In addition to regular corporate income tax
Every corporation is eligible for an accumulated earnings credit of at least…
$150,000
Accumulated earnings tax can not be imposed on a corporation that has undistributed earnings and profits of…
Less than $150,000
If an S corporation has no accumulated earnings and profits from C years, distributions to shareholders are generally…2
Nontaxable
And reduce a shareholder’s stock basis
An S-Corporation can not deduct LT capital loss when…
2) the LT capital loss will be…
Cash distributions exceed basis
2) carried forward indefinitely
A partnership is not permitted to…
Be a shareholder of an S-Corp
An S-Corp is permitted to be a…
Partner in a partnership
A subchapter S election that is filed on or before the 15th day of the third month is effective at…
The beginning of the taxable year
If an S election is made after March 15th of 2014 it will be effective on…
January 1st of 2015
A “party to the reorganization” does include the…
Consolidated company
Corporate reorganizations:
Securities in corporations (not parties to reorganization) are always treated as…
Boot
ACE adjustment calculation
ACE adjustment = 75% X (ACE AMTI - preACE AMTI)
If a corporation has $15,000 in capital gains and $20,000 in capital losses, how much capital gains and capital losses would be included in the corporation’s gross income?
$15,000 capital gains included in gross income
$15,000 capital losses included
When calculating taxable income for charitable contributions deduction interest expense and interest income (as well as capital gains and losses) would be…
Amounts included in tax return, rather than accrual basis financial statements
Taxable income to determine charitable deduction is calculated before which 2 deductions?
1 DRD
2 charitable contributions deduction
On schedule M-1, excess capital losses over capital gains goes on…
Line 3
When there is $20,000 in dividend income, is a dividend received deduction taken into account on schedule M-1?
No
Municipal arbitrage bond interest is…
Included in taxable interest
Is there a deduction for $8,000 paid to a corporation’s shareholders?
No
Dividends received deduction is allowed by corporation for receipt of dividends from what 3 entities?
1 real estate investment trust
2 mutual fund corp
3 money market fund
Taxable income “over $100,000”, what does this mean for income that is exactly $100,000?
Pays the higher rate
Net business income on schedule K of form 1120-S does not include…2
1 charitable contributions
2 portfolio income
Interest income is considered…
Portfolio income
Calculation for net business income per share, when there are 360 tax year days, 200 shares and $20,000 in net business income.
($20,000/200 shares)/360 days = $0.28/share
What is the net business income when a partner owns 50 shares, purchased January 30th and net business income per share = $0.28?
$4,690 = (50 shares x 335 days x $0.28)
If a shareholder purchases stock in an S-corp for $4,000 on January 31, 2013 and there is an ordinary business loss of $2,000 and bond interest of $300, what is the shareholder’s basis at year end?
$2,300 (doesn’t matter that it was purchased an 31, all income
included)
The dividends received deduction is not an adjustment in computing AMTI…
Before the ACE adjustment
A seven year property, for 200% declining balance method would be used under MACRS for regular tax purposes, while 150% declining balance must be used for AMT purposes…
Prior to ACE adjustment
Allowable charitable contributions do not result in…
An adjustment in computing AMTI or ACE
7 year personal property requires…
Pre ACE AMT adjustment
Real property placed into service after December 31, 1998 does…
Not require AMT adjustment
