Corporation Taxation - Book-to-Tax Flashcards Preview

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Flashcards in Corporation Taxation - Book-to-Tax Deck (19):
1

Bad Debt Expense (which represents an increase in the allowance for doubtful accounts, but no bad debt was written off) will be ________ (added to/deducted from) book income to arrive at taxable income

Added To

Bad debt expense decreased book income; however, since no bad debts were actually written off and the reserve method cannot be used for ta purposes, this amount is not deductible for tax purposes and must be added back to book income to arrive at taxable income

2

A provision for state income taxes that was deducted per books ________ (is/is not) an allowable deduction in computing taxable income

IS

Therefore there is no book-to-tax difference or adjustment needed

3

Interest expense on bank loans to purchase US Treasury Bonds that was deducted per books ________ (is/is not) an allowable deduction in computing taxable income

IS

Because the interest income from the obligations is taxable

Therefore there is no book-to-tax difference or adjustment needed

4

Interest earned on US Treasury Bonds that was included in book income _________ (is/is not) included in computing taxable income

IS

Therefore there is no book-to-tax difference or adjustment needed

5

A provision for federal income tax that was deducted per books _____ (is/is not) an allowable deduction in computing taxable income

IS NOT

Therefore there is a book-to-tax difference and an adjustment is needed

6

A net capital loss that was deducted per books _______ (is/is not) an allowable deduction in computing taxable income

IS NOT

Because a corporation can only use capital losses to offset capital gains

Therefore there is a book-to-tax difference and an adjustment is needed

7

Life insurance premiums paid in which the corporation is the beneficiary that were deducted per the books _____ (are/are not) an allowable deduction in computing taxable income

ARE NOT

Because life insurance proceeds are excluded from gross income

Therefore there is a book-to-tax difference and an adjustment is needed

8

A state corporate income tax refund that was included in book income _____ (is/is not) included in taxable income

IS

This refund would also be included in taxable income due to the "tax benefit rule" (ie., an item of deduction that reduces a taxpayer's income tax for a prior year must be included in gross income if later recovered).

Therefore there is no book-to-tax difference or adjustment needed

9

Life insurance proceeds that were included in book income ___ (are/are not) included in taxable income

ARE NOT

Therefore there is a book-to-tax difference and an adjustment is needed

10

Net capital losses that are subtracted in computing book income _____ (are/are not) included in taxable income

ARE NOT

This loss will not be included in taxable income and therefore must be added back to book income because a net capital loss is not deductible in computing taxable income.

Therefore there is a book-to-tax difference and an adjustment is needed

11

This schedule provides a reconciliation of a corporations book income with its taxable income

Schedule M-1

12

Schedule M-1 provides a reconciliation of a corporation's book income with its taxable income before the ____ deduction and the _____ deduction

DRD

Net Operating Loss

13

Federal Income Tax Expense that was expensed under book income _____ (is/is not) included in taxable income as a deduction

IS NOT

Federal income tax expense is not deductible and must be added back to book income.

Therefore there is a book-to-tax difference and an adjustment is needed

14

T/F

A net capital loss deducted per books would not be deductible for tax purposes, therefore it would appear on the Schedule M-1

TRUE

The Net Capital Loss would be added back to book income on Schedule M-1

15

T/F

Out-of-town lodging expenses are deductible for both book and tax purposes, therefore it would appear on Schedule M-1

FALSE

Schedule M-1 provides a reconciliation of a corporation's income per books with the corporation's taxable income before the NOL & DRD. Since out-of-town lodging expenses are deductible for BOTH book and tax purposes there is no need for it to appear on the reconciliation.

16

Advertising expense _____ (is/is not) deductible for book as well as taxable income purposes. Therefore it _____ (does/does not) appear on the Schedule M-1 adjustment form

IS

DOES NOT

17

This schedule is an Analysis of Unappropriated Retained Earnings Per Books

Schedule M-2

18

What is the first line on the Schedule M-2?

The balance of RE at the beginning of the year

19

What is the last line on the Schedule M-2?

The balance of RE at the end of the year