Rapidpro Inc. had more than $1,000,000 of taxable income two years prior to the current year. It would like to use its prior-year tax liability (which was very low but above zero) to determine its quarterly estimated payments this year. Which of the following statements is true?

A) Rapidpro may use the prior-year tax liability to determine its first and second quarter estimated tax payments only since it is a large corporation.

B) To avoid penalty, the second quarter estimated payment must be large enough to cover 50 percent of its estimated annual tax liability annualized from its first quarter estimated taxable income (assume it does not rely on its current-year actual tax liability to determine its estimated tax payment).

C) To avoid penalty, the third quarter estimated payment must be large enough to cover 50 percent of its estimated annual tax liability annualized from its third quarter estimated taxable income (assume it does not rely on its current-year actual tax liability to determine its estimated tax payment).

D) None of the choices are correct.

Answer: B

What is the unextended due date of the tax return of a calendar-year C corporation for 2019?

A) February 15.

B) March 15.

C) April 15.

D) October 15.

Answer: C

Which of the following is not an acceptable method of determining the required annual payment of federal income tax for corporations?

A) 100 percent of the prior year's tax liability (with a few exceptions).

B) 100 percent of the current year's tax liability.

C) 100 percent of the estimated current-year tax liability using the annualized income method.

D) All of the choices are acceptable methods of determining the required annual payment of federal income tax for corporations.

Answer: D

Which of the following statements is false regarding corporate estimated tax payments?

A) The due dates for estimated tax payments are the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year.

B) Corporations must pay estimated taxes only if they have a federal income tax liability greater than $10,000 (including the alternative minimum tax).

C) Even though a corporation extends its tax return, it still must pay its tax liability for the year by three and one-half months after year-end.

D) Corporations using the annualized income method for determining estimated tax payments project their tax liability for the year based on income from the first, second, and third quarters.

Answer: B

Omnidata uses the annualized income method to determine its quarterly federal income tax payments. It had $100,000, $50,000, and $90,000 of taxable income for the first, second, and third quarters, respectively ($240,000 in total through the first three quarters). What is Omnidata's annual estimated taxable income as of the end of the third quarter?

A) $300,000.

B) $320,000.

C) $400,000.

D) $480,000.

Answer: A

For Corporation P to file a consolidated tax return with Corporation S, P must own what percentage of P's voting stock?

A) 100 percent.

B) 80 percent.

C) More than 50 percent.

D) 50 percent or more.

Answer: B

Which of the following regarding Schedule M-1 and Schedule M-3 of Form 1120 is false?

A) In general, smaller corporations are required to complete Schedule M-1 while larger corporations are required to complete Schedule M-3.

B) Schedule M-3 lists more book-tax differences than Schedule M-1.

C) Both Schedules M-1 and M-3 reconcile to a corporation's bottom line taxable income.

D) Schedule M-1 does not distinguish between temporary and permanent book-tax differences whereas Schedule M-3 does.

Answer: C

Which of the following statements is false regarding consolidated tax returns?

A) An affiliated group can file a consolidated tax return only if it elects to do so.

B) To file a consolidated tax return, one corporation must own at least 50 percent of the stock of another corporation.

C) For a group of corporations filing a consolidated tax return, an advantage is that losses of one group member may offset gains of another group member.

D) For a group of corporations filing a consolidated tax return, losses from certain intercompany transactions are deferred until realized through a transaction outside of the group.

Answer: B

Which of the following is deductible in calculating DRD modified taxable income?

A) Charitable contribution deduction.

B) Net capital loss carrybacks.

C) NOL carryovers.

D) Dividends received deduction.

Answer: A

Jazz Corporation owns 50 percent of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income before the dividend was $100,000. What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

A) $0.

B) $5,000.

C) $6,500.

D) $10,000.

Answer: C

Jazz Corporation owns 10 percent 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.?

A) $0.

B) $4,000.

C) $5,000.

D) $6,500.

E) None of the choices are correct.

Answer: B

Jazz Corporation owns 10 percent of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before the dividend was ($6,000). What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

A) $0.

B) $2,000.

C) $4,000.

D) $5,000.

E) None of the choices are correct.

Answer: D

If a corporation's cash charitable contributions exceed the charitable contribution deduction limit, what kind of book-tax difference is created?

A) Permanent; favorable.

B) Permanent; unfavorable.

C) Temporary; favorable.

D) Temporary; unfavorable.

Answer: D

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

A) Corporations may not carry over or carry back excess charitable contributions.

B) Corporations can carry excess charitable contributions over to a future year or back to a prior year.

C) Corporations can carry excess charitable contributions over to a future year but not back to a prior year.

D) Corporations can carry excess charitable contributions back to a prior year but not over to a future year.

Answer: C

Which of the following statements regarding the dividends and/or the dividends received deduction (DRD) is true?

A) Dividends are taxed at preferential rates for corporations as well as for individuals.

B) The DRD can increase the net operating loss of a corporation.

C) Corporations are allowed to deduct from a dividend received the product of the dividend and the percentage of the receiving corporation's ownership in the distributing corporation's stock.

D) The DRD allows corporations to deduct the amount of dividends that they distribute.

Answer: B

Which of the following is not required to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity?

A) Approval of the payment from the board of directors.

B) Approval from the IRS prior to making the contribution.

C) Payment made within three and one-half months of the tax year-end.

D) All of the choices are necessary.

Answer: B

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

A) Net capital loss carrybacks.

B) Dividends received deduction.

C) NOL carryovers.

D) Charitable contributions.

Answer: C

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?

A) $6,000 current-year deduction; $1,500 carryover.

B) $7,500 current-year deduction; $0 carryover.

C) $1,200 current-year deduction; $6,300 carryover.

D) $7,200 current-year deduction; $300 carryover.

Answer: D

BTW Corporation has taxable income in the current year that can be offset with an NOL carryover from a previous year. What is the nature of the book-tax difference created by the net operating loss carryover deduction in the current year?

A) Permanent; favorable.

B) Permanent; unfavorable.

C) Temporary; favorable.

D) Temporary; unfavorable.

Answer: C

Which of the following is allowable as a deduction in calculating a corporation's net operating loss?

A) Charitable contribution deduction.

B) Net capital loss carryback.

C) Net operating loss carryover from other years.

D) Both charitable contribution deduction and net operating loss carryover from other years are deductible in computing the current-year NOL.

Answer: A