R3 M1 - C Corporation Overview Flashcards
Which of the following cannot be amortized for tax purposes?
A. Incorporation costs. B. Temporary directors' fees. C. Stock issuance costs. D. Organizational meeting costs.
Choice “C” is correct. All costs of issuing stock are not eligible to be deducted or amortized as an organizational expenditure or start-up cost.
Choice “A” is incorrect. All incorporation costs are eligible to be deducted or amortized as an organizational expenditure.
Choice “B” is incorrect. All temporary director fees are eligible to be deducted or amortized as a start-up cost.
Choice “D” is incorrect. All organizational meeting costs are eligible to be deducted or amortized as an organizational expenditure.
Choice “B” is correct. Tapper’s college matching contributions are deductible; Tapper made the contributions; the employees merely directed the proceeds. The Board’s authorized contribution is also deductible since it satisfies the two rules under which an accrual-basis corporation can deduct an accrued contribution: 1) it was authorized to a qualified charity by Board resolution before the end of the taxable year and 2) it was paid by the 15th day of the 4th month after the end of the taxable year of accrual.
Choice “A” is incorrect. This answer is only the amount authorized by the board, but the matching contribution is also deductible in Year 1.
Choice “C” is incorrect. This answer is only the matching contribution, but the contribution authorized by the board by the end of Year 1 and paid by the 15th day of the fourth month of Year 2 is also deductible in Year 1.
Choice “D” is incorrect. Both of these contributions are deductible in Year 1.
When a charitable contribution exceeds the limitation for deduction in a particular, the excess:
Maybe carried forward to a maximum of five years.
Robin, a C corporation, had revenues of $200,000 and operating expenses of $75,000. Robin also received a $20,000 dividend from a domestic corporation and is entitled to a $10,000 dividend-received deduction. Robin donated $15,000 to a qualified charitable organization in the current year. What is Robin’s charitable contributions deduction?
A. $13,500 B. $14,500 C. $13,900 D. $15,000
Choice “B” is correct. Tapper’s college matching contributions are deductible; Tapper made the contributions; the employees merely directed the proceeds. The Board’s authorized contribution is also deductible since it satisfies the two rules under which an accrual-basis corporation can deduct an accrued contribution: 1) it was authorized to a qualified charity by Board resolution before the end of the taxable year and 2) it was paid by the 15th day of the 4th month after the end of the taxable year of accrual.
Choice “A” is incorrect. This answer is only the amount authorized by the board, but the matching contribution is also deductible in Year 1.
Choice “C” is incorrect. This answer is only the matching contribution, but the contribution authorized by the board by the end of Year 1 and paid by the 15th day of the fourth month of Year 2 is also deductible in Year 1.
Choice “D” is incorrect. Both of these contributions are deductible in Year 1.
Which of the following statements is not true?
A. The dividends-received deduction for a large investment in a corporation is 65%.
B. Affiliated corporations that file consolidated returns can take a 100% dividends-received deduction.
C. The dividends-received deduction for a small investment in an unrelated corporation is 50%.
D. There is no income limitation on the dividends-received deduction.
Choice “D” is correct. There is an income limitation on the dividends-received deduction.
Choice “A” is incorrect. The dividends-received deduction for a large investment in a corporation is 65%.
Choice “B” is incorrect. Affiliated corporations that file consolidated returns can take a 100% dividends-received deduction.
Choice “C” is incorrect. The dividends-received deduction for a small investment in an unrelated corporation is 50%.
A C corporation has gross receipts of $150,000, $35,000 of other income, and deductible expenses of $95,000. In addition, the corporation incurred a net long-term capital loss of $25,000 in the current year. What is the corporation’s taxable income?
A. $87,000 B. $115,000 C. $65,000 D. $90,000
Choice “D” is correct. The C corporation’s income before net long-term capital loss is $90,000 ($150,000 + $35,000 − $95,000). For a corporation, a net long-term capital loss is not deductible in the current year (three-year carryback and five-year carryforward allowed to offset only capital gains), so the taxable income is the same amount. Thus, a corporation can only use capital losses to offset capital gains.
Choice “A” is incorrect. The $87,000 is the $90,000 reduced by a $3,000 long-term capital loss. The $3,000 deduction is available only for individuals, not for C corporations.
Choice “B” is incorrect. The $115,000 is the $90,000 plus the $25,000 net long-term capital loss. The net long-term capital loss should not be deducted or added.
Choice “C” is incorrect. The $65,000 is the $90,000 less the $25,000 net long-term capital loss. The net long-term capital loss is not deductible in the current year, but it may be carried back three years and forward five years.
