Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CPA REG > R3 - C Corporations > Flashcards

R3 - C Corporations Flashcards

1
Q

What is the only type of entity whose earnings are subject to double taxation?

A

C corporations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the general rule when the corporation issues stock in exchange for property in the formation stage?

A

No gain or loss recognized

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the general rule when the corporation purchases treasury stock?

A

No gain or loss recognized

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is the general rule when the corporation sells treasury stock?

A

No gain or loss recognized

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

The general rule is that the basis of the property received from the shareholder by the corporation is the greater of what two things?

A

1) Adjusted basis (NBV) of the shareholder (plus any gain recognized by shareholder)
2) Debt assumed by corporation (transferor may recognize gain to prevent a negative basis)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

The S/H contributing property (not services) in exchange for corporation CS has no gain or loss if what two conditions have been met?

A

1) 80% control

2) Boot not involved (received)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Is boot taxable?

A

YES

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What two items represent boot and will trigger gain recognition for the shareholder?

A

1) Cash withdrawn

2) Receipt of debt securities (e.g. bonds)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

If a shareholder receives CS for services rendered, should the FMV be recognized as ordinary income?

A

YES

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is the basis of the common stock to shareholders who contribute property?

A

Adjusted basis (NBV)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Would you add federal income taxes back to book income?

A

YES

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Do special capital gains rates apply to corporate capital gains?

A

NO

EXPLANATION: capital gains are taxed at the same rate as ordinary corporate income.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

True or false.

Corporations are entitled to the same NOL rules as individuals.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the carryback and carryforward period for corporate NOLs?

A
  • Back 2

- Forward 20

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

True or false.

Deferred taxes are only established for permanent differences.

A

False

EXPLANATION: deferred taxes are only established for TEMPORARY differences.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

List three entities for which DRD does not apply.

A

1) Personal service corporations
2) Personal holding corporations
3) (Personally taxed) S corporations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is the DRD for 0% to

A

70%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is the DRD for 20% to

A

80%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is the DRD for 80% or more ownership?

A

100%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the filing due date for a corporation with a 12/31 year end?

A

March 15th

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What qualifies as a large corporation?

A

TI was $1 million or more in any of its three preceding tax years

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Up to 3 taxes may be levied on a C-corporation. What are they?

A

1) Regular tax
2) Minimum tax
3) Accumulated earnings tax OR personal holding companies tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Define affiliated group.

A

Means that a common parent directly owns:

a) 80% or more of the voting power of all o/s stock AND
b) 80% or more of the value of all o/s stock of each corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Is there a 100% DRD on a consolidated tax return?

A

YES

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What do you call corporations where an individual owns 80% or more of the stock of two or more corporations?

A

Brother-sister corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

May brother-sister corporations file consolidated returns?

A

NO

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is the difference b/w consolidation under GAAP vs. Tax?

A 
GAAP = over 50%
Tax = 80-100%
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

True or false.

One of the advantages of filing a consolidated return is that income from certain intercompany sales may be deferred.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What does ACE stand for?

A

Adjusted Current Earnings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Why is the ACE adjustment included?

A

To ensure that corporations do not report a profit for F/S purposes but pay little or no income taxes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

What is the additional tax rate for accumulated earnings?

A

Flat 20%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

If a corporation’s tentative minimum tax exceeds the regular tax, what happens to the excess amount?

A

Payable in addition to regular tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

What effect would a “state tax refund from prior year received in current year” have on E&P?

A

No effect

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

How does the IRC define a dividend?

A

A distribution of property by a corporation out of its earnings and profits (E&P)

35
Q

Is current E&P (by year-end) a taxable dividend?

A

Yes

36
Q

Is accumulated E&P (distribution date) a taxable dividend?

A

Yes

37
Q

Is return of capital (no E&P) a taxable dividend?

A

No

EXPLANATION: tax free and reduces basis of common stock

38
Q

Is capital gain distribution (no E&P/no basis) a taxable dividend?

A

No

EXPLANATION: Taxable income as capital gain

39
Q

Is a stock dividend generally taxable?

A

NO

40
Q

When is a stock dividend taxable?

A

When shareholder has a choice of receiving cash or other property

41
Q

On January 1, Year 1, Kee Corp., a C corporation, had a $50,000 deficit in earnings and profits. For Year 1, Kee had current earnings and profits of $10,000 and made a $30,000 cash distribution to its shareholders. What amount of the distribution is taxable as dividend income to Kee’s stockholders?

A

$10,000

42
Q

Temporary or permanent difference.

Certain proceeds from life insurance on life of an officer where the corporation is the beneficiary.

A

Permanent difference

43
Q

What does QPAI stand for?

A

Qualified production activities income

44
Q

How do you calculate QPAI (qualified production activities income)?

A 
Domestic production gross receipts
(COGS)
(Other directly allocable expenses or losses)
(Proper share of other deductions)
= QPAI
45
Q

A publicly held corporation may NOT deduct compensation expense in excess of what paid to the CEO or the four other most highly compensated officers?

A

$1 million

46
Q

Accrual basis taxpayers must use what method for bad debts for tax purposes?

A

Specific charge-off method

EXPLANATION: Tax deduction when specific A/R written off

47
Q

When should one deduct a prepaid business interest expense?

A

Deduct “later” when incurred

48
Q

How much should one deduct for business interest expense on investments?

A

Deduct up to investment income

49
Q

Any disallowed charitable contribution by a corporation may be carried forward for how long?

A

5 years

50
Q

Up to what percent may a business deduct for business losses or casualty losses related to the business?

A

100% deductible

51
Q

For property that is only partially destroyed, the loss is limited to the lesser of what?

A

1) Decline in value of property (Change in FMV)

2) NBV of property immediately before casualty

52
Q

For property that has been fully destroyed, the amount of the loss is what?

A

NBV of the property

53
Q

What is the difference in the GAAP and the tax rule for organizational and start-up expenses?

A

Tax Rule: $5,000 expense maximum/180 months of amortization of remainder

GAAP Rule: Expense

54
Q

What is the difference in the GAAP and the tax rule for purchased goodwill?

A

Tax Rule: amortized on straight-line basis over 15 years

GAAP Rule: not amortized; test for impairment

55
Q

Business gifts are deductible up to a maximum deduction of what amount per recipient per year?

A

$25

56
Q

Business meals and entertainment are what percent deductible to the corporation?

A

50% tax deductible

57
Q

What types of taxes are deductible when incurred on property or income relating to the business?

A

1) State income tax
2) City income tax
3) Federal payroll tax

58
Q

Are direct-type lobbying expenses in connection with LCOAL governmental lobbying tax deductible?

A

YES

59
Q

Are lobbying expense incurred in attempting to influence state or federal legislation tax deductible?

A

NO

60
Q

Is the $3,000 deduction for net capital losses available to corporations?

A

NO

EXPLANATION: corporation can only use capital losses to offset capital gains

61
Q

What is the capital loss carryover period for corporations?

A

3 back, 5 forward

EXPLANATION: they are carried over as ST capital losses and are applied only against capital gains.

62
Q

How are capital gains taxed?

A

At ordinary tax rates

63
Q

What is the NOL carryover period for corporations?

A

2 back, 20 forward

EXPLANATION: same rules as for individuals

64
Q

Deferred taxes are only established for what type of differences?

A

Temporary differences

65
Q

What is the additional tax rate for accumulated earnings?

A

Flat 20%

66
Q

The accumulated earnings tax is imposed on regular C corporations whose accumulated (retained) earnings are in excess of what amount if improperly retained instead of being distributed as dividends to (high tax bracket) shareholders?

A

$250,000

67
Q

Is the accumulated earnings tax imposed on personal service corporations?

A

YES

68
Q

Is the the accumulated earnings tax imposed on personal holding companies?

A

NO

69
Q

What is defined as corporations more than 50% owned by 5 or fewer individuals (either directly or indirectly at any time during the last half of the tax year) and having 60% of adjusted ordinary gross income consisting of NIRD?

A

Personal holding company

70
Q

In relation to personal holding companies, what does NIRD represent?

A

NIRD
Net rent (if less than 50% of ord. gross income)
Interest that is taxable
Royalties (not mineral, oil, gas, copyright roy.)
Dividends from an unrelated domestic corp.

71
Q

Corporations deemed to be personal holding companies are taxed at an additional ____ percent on personal holding company net income not distributed.

A

20%

72
Q

A corporation’s E&P is a major factor in determining the ability of the corporation to do what?

A

Pay dividends to the shareholders

73
Q

What is the starting point for the calculation of E&P?

A

Start w/ corporate taxable income

74
Q

Stock dividends are generally not taxable unless the shareholder has a choice of what?

A

Receiving cash or other property

75
Q

What is defined as a distribution by a corporation of its own stock to its shareholders?

A

Stock dividend

76
Q

The value of a taxable stock dividend is the FMV on what date?

A

Distribution date

77
Q

True or false.

The general rule is the PMT of a dividend does not create a taxable event. A dividend is a reduction of earnings and profits (retained earnings).

A

True

78
Q

True or false.

A corporation’s capital loss carryback or carryover is always treated as a ST capital loss.

A

True

EXPLANATION: Corporations may not deduct any capital loss from ordinary income, but instead only carry it back 3 and forward 5 as “ST” capital loss to deduct from net capital or Section 1231 gains.

79
Q

True or false.

PHCs are corporations that meet certain “closely-held” ownership criteria and have over 50% of their AGI consisting of net ret (less than 50% of ordinary gross income), taxable interest, most royalties, and dividends from an unrelated domestic corporation.

A

False

EXPLANATION: While most of the info is correct, it is when over 60% of the AGI of a closely-held corporations consists of “NIRD” that it is defined as a PHC. Not over 50% (as in the selection).

80
Q

Mock operates a retail business selling illegal drugs. Which of the following may Mock deduct in calculating business income?

I. Cost of merchandise
II. Business expenses other than cost of merchandise

A

I. Cost of merchandise

EXPLANATION: A gain from an illegal activity is includible in income. To determine the gain, a deduction is permitted for the cost of merchandise. Business expenses for operating illegal business, other than the cost of merchandise, are not permitted as deduction.

81
Q

True or false.

The general rule is that the accrual method of accounting will be required by tax shelters, large C corporations and manufacturers.

A

True

82
Q

True or false.

A qualified personal service corporation is permitted to use the cash method of accounting.

A

True

83
Q

Does a PHC deduct federal income taxes in computing undistributed PHC income?

A

YES

84
Q

Does a PHC deduct net LT capital gain less related federal income taxes in computing undistributed PHC income?

A

YES

CPA REG (17 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions