Corporate Taxable Computations Flashcards
The last marginal tax bracket, above which all corporate income is taxed at a single rate, begins at $15,000,000 of income?
No, corporate income between $15,000,000 and $18,333,333 is taxed at a 38% rate. The last corporate tax bracket of 35% begins at $18,333,333 of income.
Two of the tax rate brackets imposed by Sec. 11 on the taxable income of most corporations include surtaxes?
Yes, two of the tax rate brackets imposed by Sec. 11 on the taxable income of most corporations include surtaxes. A surtax of 5% is charged on taxable income (TI) between $100,000 and $335,000, which eliminates the tax savings on the first $100,000 of taxable income from the benefits of 15% and 25% rates. A 3% surtax is charged on TI between $15,000,000 and $18,333,333, which recaptures the tax savings from $335,000 to $10,000,000 by phasing out the 34% rate.
Corporations may take a Lifetime Learning Credit for employee education expenses?
No, most tax credits are allowable to corporations. Not permitted are Earned Income Credit, Child and Dependent Care Credit, Elderly and Disabled Credit, Child Tax Credit, Adoption Credit, American Opportunity Credit, and Lifetime Learning Credit.
A foreign corporation conducting a business in the U.S. is permitted to take the Foreign Tax Credit (FTC) on its U.S. taxes to offset foreign taxes paid on the income derived from that business?
Yes, for a non-U.S. person, the FTC is allowed only for foreign taxes paid on income effectively connected with conduct of a trade or business in the U.S. and against U.S. tax on the effectively connected income. Nonresident aliens and foreign corporations are included under this provision.
Qualified foreign taxes (QFTs) include foreign taxes on income, war profits, and excess profits?
Yes, qualified foreign taxes (QFTs) include foreign taxes on income, war profits, and excess profits.
Foreign taxes paid in excess of the Foreign Tax Credit limit can be carried over?
Yes, foreign taxes paid in excess of the Foreign Tax Credit limit can be carried over. They may be carried back 1 year and forward 10 in chronological order.
Two S corporations that are members of an affiliated group may file a consolidated return, but two insurance corporations may not?
No, a single federal income tax return may be filed by two or more includible corporations that are members of an affiliated group. Includible corporations are all corporations except the following: tax-exempt corporations, S corporations, foreign sales corporations (FSC), insurance corporations, REITs (real estate investment trusts), regulated investment companies, DISCs (domestic international sales corporations), and those corporations that claim Sec. 936 possessions tax credit.
To file a consolidated tax return, the corporations included must obtain IRS approval?
No, election to file a consolidated return is made by the act of filing a consolidated return. Consent of each included corporation is required. Consolidated financial statements or IRS approval is not required to file a consolidated return. Consent of the IRS is required to terminate an election.
Each subsidiary included in a consolidated return must adopt the parent’s accounting method?
No, one or more members of a controlled group filing a consolidated return may use the cash method, and one or more others may use the accrual method. Each subsidiary included in a consolidated return must adopt the parent’s tax year.
A 10% dividends received deduction is allowed on a dividend from one consolidating corporation to another?
No, a dividend distributed by one consolidating corporation to another is eliminated. The dividends received deduction (DRD) is not allowed for such dividends.
A consolidated NOL may only be carried 3 years back and 5 years forward?
No, carryover of a consolidated NOL is allowed only to a prior or subsequent year of a consolidation election. Special rules apply when members change.
A gain or loss from the sale of an asset between members of a consolidated group is deferred?
Yes, a gain or loss from the sale of an asset between members of a consolidated group is deferred. For consolidation purposes, the buyer in the intercompany transaction assumes the same basis and holding period as the selling member.
A parent-subsidiary controlled group consists of two corporations if one of the corporations owns stock that represents 50% or more of total voting power and 50% or more of total value outstanding?
No, a parent-subsidiary controlled group consists of two corporations if one of the corporations owns stock that represents:
80% or more of total voting power or
80% or more of total value outstanding of the stock of the other; and
Any other corporation that meets these requirements (if the two corporations discussed and others in the group own stock in it).
A controlled group must share the AMT exemption base of $40,000?
Yes, each of the following is an example of tax benefit items of which only one must be shared by the members of a controlled group: tax brackets; Sec. 179 expensing maximum of $510,000; AMT exemption base of $40,000; general business credit $25,000 offset; and AET $250,000 presumed deduction base. A controlled group generally may choose any method to allocate the amounts among themselves. In default, an item is divided equally among members.
Loss is recognized when property is sold by one member of a controlled group to another?
No, anti-avoidance rules apply to transactions between members of a controlled group. Loss is not recognized when property is sold by one member of a controlled group to another. However, the loss may be recognized on a subsequent sale to an unrelated third party.
