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Exam 5: Corporate Operations

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Question 51

Multiple Choice

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Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

A) Net capital loss carrybacks.
B) NOL carrybacks.
C) NOL carryovers.
D) Charitable contributions.

E) B) and C)
F) A) and B)

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Question 52

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Calendar-year corporations that request an extension for filing their 2017 tax returns will have a tax return due date of October 15.

A) True
B) False

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Question 53

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Income that is included in book income,but excluded from taxable income,results in a favorable,permanent book-tax difference.

Remsco has taxable income of $60,000 and a charitable contribution limit modified taxable income of $72,000.Its charitable contributions for the year were $7,500.What is Remsco's current-year charitable contribution deduction and contribution carryover?

Net operating losses generally create permanent book-tax differences.

A corporation generally will report a favorable,temporary book-tax difference when it deducts a charitable contribution carryover.

Which of the following statements regarding excess charitable contributions (contributions in excess of the modified taxable income limitation) by corporations is true?

Large corporations (gross receipts of $5 million or more)are allowed to use the cash method of accounting for at least the first two years of their existence.

In 2017,Webtel Corporation donated $50,000 to a qualifying charity.For the year,it reported taxable income of $310,000,which included the following: the $50,000 charitable contribution (before limitation),a $100,000 dividends received deduction,and a $20,000 net operating loss carryover.What is Webtel Corp.'s charitable contribution deduction?

The dividends received deduction is subject to a limitation based on modified taxable income.

Corporations calculate adjusted gross income (AGI)in the same way as individuals.

Jazz Corporation owns 10% of the Williams Corp.stock.Williams distributed a $10,000 dividend to Jazz Corporation.Jazz Corp.'s taxable income (loss) before the dividend was ($2,000) .What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Large corporations (corporations with more than $1,000,000 in taxable income in any of the three years prior to the current year)can use their prior tax year liability to determine all required estimated quarterly payments for the current year.

Which of the following does NOT create a permanent book-tax difference?

For 2017,accrual-method corporations cannot deduct charitable contributions until they actually make payment to the charity.

Canny Foods Co.is considering three ways it could contribute to a local,qualified charity.First,it could give $5,000 in cash.Second,it could give stock it initially purchased two years ago for $4,000 but is now worth $6,000.Third,it could give items of inventory with a fair market value of $7,000 but with an adjusted basis of $3,000.Which of the following correctly describes the relation among possible charitable contributions in terms of amount deductible for tax purposes?

Corporation A receives a dividend from Corporation B.Corporation A includes the dividend in its gross income for tax and financial accounting purposes (no book-tax difference) .If A has accounted for the dividend correctly (following the general rule) ,how much of B stock does A own?

Federal income tax expense reported on a corporation's books generates a temporary book-tax difference for Schedule M-3 purposes.

During 2017,Hughes Corporation sold a portfolio of stock it had held for five years at a loss of $200,000.It also sold some investment land and recognized a capital gain of $180,000.In 2015,Hughes reported a net capital gain of $12,000 and in 2016 it recognized a net capital gain of $6,000.What is the amount of its net capital loss carryover to 2018?

Which of the following statements regarding book-tax differences is true?