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.