Advanced Corporate Taxation
Pre-Test Questions
Course Introduction
Advanced Corporate Taxation delves deeply into the complex tax issues facing corporations in both domestic and multinational contexts. The course examines topics such as the taxation of corporate formations, distributions, liquidations, mergers and acquisitions, and reorganizations, along with the tax consequences for shareholders and corporate entities. Through analysis of statutes, regulations, and case law, students gain a thorough understanding of strategic tax planning, compliance responsibilities, and recent developments in corporate tax legislation. Special focus is given to the practical application of tax principles, tax shelters, cross-border tax issues, and ethical considerations relevant to corporate tax professionals.
Recommended Textbook
McGraw Hills Taxation of Business Entities 2019 Edition 10th Edition by Brian C. Spilker
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14 Chapters
1476 Verified Questions
1476 Flashcards
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Page 2
Chapter 1: Business Income, Deductions, and Accounting Methods
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) In order to deduct a portion of the cost of a business meal which of the following conditions must be met?
A) A client (not a supplier or vendor) must be present at the meal.
B) The taxpayer or an employee must be present at the meal.
C) The meal must occur on the taxpayer's business premises.
D) None of these choices is a condition for the deduction.
E) All of the choices are conditions for a deduction.
Answer: B
Q2) The full-inclusion method requires cash basis taxpayers to include prepayments for goods or services into realized income.
A)True
B)False
Answer: False
Q3) Adjusted taxable income for calculating the business interest limitation is defined as taxable income of the taxpayer computed without regard to any item of income, gain, deduction, or loss which is not properly allocable to a trade or business.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Property Acquisition and Cost Recovery
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) Goodwill and customer lists are examples of §197 amortizable assets.
A)True
B)False
Answer: True
Q2) All taxpayers may use the §179 immediate expensing election on certain property.
A)True
B)False
Answer: False
Q3) Tax cost recovery methods do not include:
A) Amortization.
B) Capitalization.
C) Depletion.
D) Depreciation.
E) All of the choices are tax cost recovery methods.
Answer: B
Q4) Depletion is the method taxpayers use to recover their capital investment in natural resources.
A)True
B)False
Answer: True
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Chapter 3: Property Dispositions
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Which of the following is not an involuntary conversion?
A) Destruction caused by a hurricane.
B) Imminent domain.
C) A foreclosure.
D) Fire damage.
E) All of these choices are involuntary conversions.
Answer: C
Q2) Sunshine LLC sold furniture for $75,000. Sunshine bought the furniture for $90,000 several years ago and has claimed $25,000 of depreciation expense on the machine.
What is the amount and character of Sunshine's gain or loss?
Answer: $10,000 ordinary gain.
§1245 recaptures the lesser of depreciation taken ($25,000) or recognized gain ($10,000) as ordinary income. Any remaining gain would be §1231 gain.
Q3) §1231 assets include all assets used in a trade or business.
A)True
B)False
Answer: False
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Chapter 4: Entities Overview
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80 Verified Questions
80 Flashcards
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Sample Questions
Q1) Robert is seeking additional capital to expand ABC Inc. In order to qualify ABC as an S corporation, which type of investor group could Robert obtain capital from?
A) 30 different partnerships.
B) 10 different C corporations.
C) 90 nonresident individuals.
D) 120 unrelated resident individuals.
E) None of the choices are correct.
Q2) C corporations and S corporations are separate taxpaying entities that pay tax on their own income.
A)True
B)False
Q3) The deduction for qualified business income applies to owners of C corporations but not to flow-through entity owners.
A)True
B)False
Q4) For tax purposes, only unincorporated entities can be considered to be disregarded entities.
A)True
B)False
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Chapter 5: Corporate Operations
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.
A)True
B)False
Q2) A corporation may carry a net capital loss back two years and forward 20 years.
A)True
B)False
Q3) Large corporations (corporations with more than $1,000,000 in taxable income in any of the three years prior to the current year) can use their prior tax year liability to determine all required estimated quarterly payments for the current year.
A)True
B)False
Q4) 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.
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Chapter 6: Accounting for Income Taxes
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) Temporary differences that are cumulatively "favorable" are referred to as taxable temporary differences.
A)True
B)False
Q2) ASC 740 is the sole source of rules related to accounting for income taxes.
A)True
B)False
Q3) Which of the following statements best describes "book equivalent of taxable income" (BETI)?
A) BETI is book income adjusted for all permanent and temporary differences.
B) BETI is book income adjusted for all temporary differences.
C) BETI is book income adjusted for all permanent differences.
D) BETI is book income before adjustment for all permanent and temporary differences.
Q4) Temporary differences create either a deferred tax asset or a deferred tax liability.
A)True
B)False
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Chapter 7: Corporate Taxation: Nonliquidating Distributions
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) Catamount Company had current and accumulated E&P of $500,000 at December 31, 20X3. On December 31, the company made a distribution of land to its sole shareholder, Caroline West. The land's fair market value was $200,000 and its tax and E&P basis to Catamount was $250,000. The tax consequences of the distribution to Catamount in 20X3 would be:
A) No loss recognized and a reduction in E&P of $250,000.
B) $50,000 loss recognized and a reduction in E&P of $250,000.
C) $50,000 loss recognized and a reduction in E&P of $150,000.
D) No loss recognized and a reduction in E&P of $200,000.
Q2) Which of the following are subtractions from taxable income in computing current E&P?
A) Federal income taxes paid.
B) Current charitable contributions in excess of 10 percent limitation.
C) Current year net capital loss.
D) All of the choices are subtractions from taxable income in computing current E&P.
Q3) A stock redemption is always treated as a sale or exchange for tax purposes.
A)True
B)False
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Chapter 8: Corporate Formation, Reorganization, and Liquidation
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) April transferred 100 percent of her stock in June Company to March Corporation in a taxable merger. In exchange she received stock in March with a fair market value of $400,000 plus $1,200,000 in cash. April's tax basis in the June stock was $2,000,000. What amount of loss does April recognize in the exchange and what is her basis in the March stock she receives?
Q2) Robin transferred her 60 percent interest to Cardinal Company as part of a complete liquidation of the company. In the exchange, she received land with a fair market value of $800,000. Robin's basis in the Cardinal stock was $900,000. The land had a basis to Cardinal Company of $1,000,000. What amount of loss does Cardinal recognize in the exchange and what is Robin's basis in the land she receives? The distribution was non pro rata to Robin, a related person.
A) $200,000 loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin.
B) $200,000 loss recognized by Cardinal and a basis in the land of $800,000 to Robin.
C) No loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin.
D) No loss recognized by Cardinal and a basis in the land of $800,000 to Robin.
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Page 10
Chapter 9: Forming and Operating Partnerships
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Partners adjust their outside basis by adding non-deductible expenses and subtracting any tax-exempt income to avoid being double taxed.
A)True
B)False
Q2) The term "outside basis" refers to the partnership's basis in its assets; whereas, the term "inside basis" refers an individual partner's basis in her partnership interest.
A)True B)False
Q3) In each of the independent scenarios below, how does the partner or partnership determine its holding period in the property received?
a. A partner contributes property in exchange for a partnership interest
b. The partnership receives contributed property
c. A partner contributes services in exchange for a partnership interest
d. A partner purchases a partnership interest from an existing partner
Q4) The character of each separately stated item is determined at the partner level. A)True B)False
Q5) What is the difference between a partner's tax basis and at-risk amount?
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Chapter 10: Dispositions of Partnership Interests and Partnership Distributions
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) Hot assets include assets except cash, capital assets and §1231 assets.
A)True
B)False
Q2) Jaime has a basis in her partnership interest of $50,000 when the partnership distributes (in an operating distribution) two parcels of land to Jaime, each valued at $30,000. Prior to the distribution, the partnership's basis in parcel A is $40,000 and the basis in parcel B is $20,000. Jaime allocates $20,000 of basis to parcel A and $30,000 of basis to parcel B.
A)True
B)False
Q3) Riley is a 50% partner in the RF Partnership and has an outside basis of $56,000 at the end of the year prior to any distributions. On December 31, Riley receives a proportionate operating distribution of $6,000 cash and a parcel of land with a $14,000 fair value and an $8,000 basis to RF. What is the amount and character of Riley's recognized gain or loss and what is his basis in his partnership interest?
A) $0 gain, $36,000 basis.
B) $0 gain, $42,000 basis.
C) $0 gain, $50,000 basis.
D) $0 gain, $56,000 basis.
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Chapter 11: S Corporations
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Assume that Clampett, Inc. has $200,000 of sales, $150,000 of cost of goods sold, $60,000 of interest income, and $40,000 of dividends. What is Clampett, Inc.'s excess net passive income?
A) $0.
B) $25,000.
C) $75,000.
D) $100,000.
E) None of the choices are correct.
Q2) Maria resides in San Antonio, Texas. She formed MZE Corporation under the state laws of Texas. Maria anticipates that she will conduct her business activities in both Mexico and the United States. Is MZE eligible to elect S corporation status? Explain.
Q3) In general, an S corporation shareholder makes increasing adjustments to her basis first, followed by adjustments that decrease basis.
A)True
B)False
Q4) Publicly traded corporations cannot be treated as S corporations.
A)True
B)False
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Chapter 12: State and Local Taxes
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) Delivery of tangible personal property through common carrier is a protected activity.
A)True
B)False
Q2) All 50 states impose a sales and use tax system.
A)True
B)False
Q3) Tennis Pro, a Virginia Corporation domiciled in Virginia, has the following items of income: $5,000 of dividend income, $15,000 of interest income, $10,000 of rental income from Georgia property, $30,000 of royalty income for an intangible used in Maryland (where income tax nexus exists). Determine how much income is allocated to Virginia.
Q4) Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. The Shop sells, manufacturers, and customizes tennis racquets for serious amateurs. Virginia has a 5 percent sales tax. Assume that a District of Columbia customer picks up a $2,000 racquet order in the Blacksburg store and drives it back to the District of Columbia (where the sales tax rate is 8.5 percent). Determine the sales and use tax liability (assume the Shop has no sales personnel or property in District of Columbia) of the customer?
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Page 14
Chapter 13: The US Taxation of Multinational Transactions
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89 Verified Questions
89 Flashcards
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Sample Questions
Q1) Ames Corporation has a precredit U.S. tax of $210,000 on $1,000,000 of taxable income in 2018. Ames has $600,000 of foreign source taxable income and paid $120,000 of income taxes to the U.K. government on this income. All of the foreign source income is treated as foreign branch income for foreign tax credit purposes. Ames's foreign tax credit on its 2018 tax return will be:
A) $210,000
B) $126,000
C) $120,000
D) $72,000
Q2) Nexus involves the criteria used by a government to assert its right to tax a person or transaction within or without its borders.
A)True
B)False
Q3) Before subpart F applies, a foreign corporation must be a CFC for how many consecutive days?
A) 1
B) 30
C) 183
D) 365
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Page 15
Chapter 14: Transfer Taxes and Wealth Planning
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123 Verified Questions
123 Flashcards
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Sample Questions
Q1) Proceeds of life insurance paid to the decedent's estate due to the death of the decedent are included in the decedent's gross estate even if the decedent had no ownership rights in the policy at the time of death.
A)True
B)False
Q2) Which of the following is a True statement about the Federal gift tax return (Form 709)?
A) Form 709 is due by the 15 day of the ninth month following the date of the gift.
B) Form 709 must be filed if a taxpayer wishes to elect gift splitting.
C) Form 709 need not be filed unless a taxpayer's taxable gifts exceed the exemption equivalent.
D) Form 709 is due nine months after the death of the decedent.
E) None of the choices are True.
Q3) The amount of the estate tax is directly related to the amount of taxable gifts.
A)True
B)False
Q4) Ricardo transferred $1,000,000 of cash to State University for a new sports complex. Calculate the amount of the taxable gift.
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Page 16