Chapter C5 Other Corporate Tax Levies

32) Identify which of the following
statements is true.
A) The ACE adjustment is required of S
corporations.
B) The 70% dividends-received deduction reduces
preadjustment AMTI to arrive at ACE.
C) The 80% dividends-received deduction
can be claimed when computing a corporation’s adjusted current earnings (ACE).
D) All of the above are false.

33) Mountaineer, Inc. has the following
results:

Regular corporate tax liability

$ 400,000

Taxable income

2,000,000

Preferences

500,000

Adjustments

(200,000)

What is the amount of the tentative
minimum tax?
A) $500,000
B) $360,000
C) $460,000
D) none of the above

34) Mountaineer, Inc. has the following
results:

Regular corporate tax liability

$ 400,000

Taxable income

2,000,000

Preferences

500,000

Adjustments

(200,000)

What is the amount of the alternative
minimum tax?
A) $0
B) $60,000
C) $100,000
D) none of the above

35) Identify which of the following
statements is true.
A) The minimum tax credit carries forward
indefinitely and offsets regular tax liabilities in future years.
B) The minimum tax credit available for a
corporation’s alternative minimum tax liability can be carried over for five
years.
C) The general business credit is
permitted to offset 100% of the larger of (1) a corporation’s regular tax
amount, or (2) its tentative minimum tax amount.
D) All of the above are false.

36) Which of the following statements
regarding the minimum tax credit is correct?
A) It can only be carried forward.
B) It must be carried back before being
carried forward.
C) Taxpayers may elect to forgo the
carryback period and carry the credit forward.
D) There are not carryforwards or
carrybacks of the minimum tax credit.

37) Beta Corporation incurs an $80,000
regular tax liability and a $20,000 AMT liability. Assuming no restrictions on
Beta’s ability to use the minimum tax credit, what journal entry would be
necessary to record tax expense?
A)

Federal income tax expense

60,000

Deferred tax asset

20,000

Taxes
payable

80,000

B)

Federal income tax expense

80,000

Taxes payable

80,000

C)

Federal income tax expense

60,000

Taxes
payable

60,000

D)

Federal income tax expense

80,000

Deferred
tax asset

20,000

Taxes
payable

60,000

38) ASC 740 requires that
A) the AMT is not considered as federal
income tax expense.
B) companies must establish a valuation
allowance for the minimum tax credit.
C) the minimum tax credit creates a
deferred tax asset.
D) the minimum tax credit increases
federal income tax expense.

39) The personal holding company tax might
be imposed
A) on both partnerships and corporations.
B) on companies whose gross income arises
solely from rentals, if the lessors render no services to the lessees.
C) if more than 50% of the company is
owned by five or fewer individuals for the entire year.
D) on small business investment companies
licensed by the Small Business Administration.

40) Foster Corporation has gross income
for regular tax purposes of $100,000, which includes a net Sec. 1231 gain of
$10,000 and a net capital gain of $10,000. Ordinary gross income for personal
holding company purposes is
A) $70,000.
B) $80,000.
C) $90,000.
D) $100,000.

41) Identify which of the following
statements is false.
A) Askew Corporation has ten unrelated
shareholders, each of whom owns 10% of the outstanding stock. This corporation
is a personal holding company.
B) Stock owned by an individual, in
addition to stock attributed from her spouse, parents, children, and siblings,
are all counted towards whether or not the personal holding company stock
ownership test has been met.
C) S corporations and tax-exempt
organizations are excluded from the personal holding company (PHC) definition.
D) A person who holds an option to acquire
stock is considered to own the stock for purposes of the PHC stock
requirements.