Question 1

Corporations with taxable incomes in excess of $18,333,333 have a 35% marginal tax rate and a 35% average tax rate.

Accepted Answer

This statement is true according to the current US tax laws. For corporations with taxable incomes over $18,333,333, the marginal tax rate and the average tax rate are both 35%.

Question 2

The rate schedule for determining the regular tax liability of a corporation includes rates ranging from 15% to 39%.

Accepted Answer

This is true. The corporate tax rate ranges from 15% to 39%, depending on the amount of taxable income.

Question 3

If a corporation's depreciation expense for regular tax purposes is $32,000 and its depreciation expense for alternative minimum tax purposes is $28,000,such corporation will have a negative (decrease)depreciation adjustment for alternative minimum taxable income.

Accepted Answer

The answer of If a corporation's depreciation expense for regular...

Question 4

The corporate alternative minimum tax is designed to insure that corporations with substantial economic income will pay their fair share of the federal tax burden.

Accepted Answer

The statement is true. The corporate alternative minimum tax is a separate tax system that ensures corporations with high economic income do not use tax deductions and credits to avoid paying federal taxes. Instead, they must pay a minimum tax amount based on their income, allowing for a more equitable distribution of the tax burden.

Question 5

Corporations with more than $1 million taxable income must pay 100% of their current federal income tax liability in the form of quarterly estimate payments to avoid an underpayment penalty.

Accepted Answer

This is true according to the IRS guidelines on estimated tax payments for corporations with more than $1 million in taxable income. Failure to make these quarterly payments can result in an underpayment penalty.

Question 6

Corporations are required to pay their federal tax liability in four quarterly estimated tax installments.

Accepted Answer

Corporations are indeed required to pay their federal tax liability in four quarterly estimated tax installments. These installments are typically due on the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. Failure to make these payments can result in penalties and interest.

Question 7

The taxable income earned by a personal service corporation is taxed at a flat rate of 35%.

Accepted Answer

Personal service corporations are subject to a flat tax rate of 35% on their taxable income. This is different from regular corporations, which are subject to a graduated corporate tax rate.

Question 8

Most tax credits for which a corporate taxpayer would be eligible are nonrefundable.

Accepted Answer

Most tax credits for corporations are nonrefundable, meaning they can only reduce a taxpayer's liability up to zero, without providing a refund for any excess credit.

Question 9

Generally,the corporate income tax is computed on a proportionate rate schedule.

Accepted Answer

Corporate income tax is often computed on a graduated rate schedule, where different portions of income are taxed at different rates, rather than a single proportionate rate.

Question 10

Hearth,Inc.reported $30,000 of depreciation expense on its financial statements.For federal income tax purposes,it deducted depreciation of $35,000.This book/tax difference would result in an increase to net income per books on the Schedule M-1 or M-3.

Accepted Answer

The book/tax difference results in a decrease to net income per books on the Schedule M-1 or M-3. This is because the tax deduction for depreciation on the tax return is higher than the depreciation expense reported on the financial statements, which reduces taxable income and therefore reduces tax liability. As a result, the company's net income per books would be higher than its taxable income, leading to a decrease in net income per books on the Schedule M-1 or M-3.

Question 11

A corporation's minimum tax credit can reduce the corporation's future regular tax liability if regular tax liability exceeds tentative minimum tax in that year.

Accepted Answer

The minimum tax credit can reduce the corporation's future regular tax liability if regular tax liability exceeds tentative minimum tax in that year. This credit helps to alleviate the burden of the Alternative Minimum Tax (AMT) and provide some relief for corporations that may have previously paid higher taxes.

Question 12

For a corporate taxpayer in the 34% marginal tax bracket,a $20,000 tax credit is equivalent to a $58,824 tax deduction.

Accepted Answer

This is true because a tax credit reduces taxes owed dollar for dollar, while a tax deduction only reduces taxable income. To find the equivalent tax deduction, you would divide the tax credit by (1 - marginal tax rate). In this case, 1 - 0.34 = 0.66, so $20,000 / 0.66 = $58,824.

Question 13

The corporate alternative minimum tax rate is 26% of AMTI in excess of the AMT exemption.

Accepted Answer

The corporate alternative minimum tax (AMT) was repealed by the Tax Cuts and Jobs Act of 2017, effective for tax years beginning after December 31, 2017.

Question 14

The domestic production activities deduction is computed as a percentage of the greater of taxable income or net income from qualified production activities.

Accepted Answer

The domestic production activities deduction was computed as a percentage of the lesser of taxable income or net income from qualified production activities, not the greater.

Question 15

A corporate taxpayer would prefer a $50,000 deduction to a $50,000 credit.

Accepted Answer

The answer of A corporate taxpayer would prefer a $50,000...

Question 16

Angel Corporation's current-year regular tax liability is $40,000.Angel is eligible for a general business credit of $45,000.The corporation will receive a $5,000 refund of federal income tax.

Accepted Answer

Angel Corporation can use the general business credit up to the amount of its tax liability, which is $40,000, reducing its tax liability to $0. The excess $5,000 cannot be refunded but may be carried back or forward to other tax years under general business credit rules.

Question 17

For a consolidated group of corporations,Schedule M-3 reconciles worldwide financial statement net income to the financial statement net income of those corporations permitted to be included in the U.S.consolidated tax return group.

Accepted Answer

Schedule M-3 is a required form for consolidated groups of corporations to reconcile their worldwide financial statement net income to the financial statement net income of those corporations that are included in the U.S. consolidated tax return group. This form is used to identify any differences between the financial statement net income and the taxable income reported on the tax return, which helps ensure compliance with tax regulations.

Question 18

A corporation that is unable to meet its original filing deadline may obtain an automatic twelve-month extension of the time to file its federal income tax return.

Accepted Answer

A corporation can obtain an automatic six-month extension, not twelve months, for filing its federal income tax return by submitting Form 7004 by the original due date of the return.

Question 19

The domestic production activities deduction is a permanent book/tax difference.

Accepted Answer

The domestic production activities deduction is a permanent book/tax difference, which means it affects the calculation of taxable income differently on the company's financial statements than on its tax return. It is not a temporary difference that will eventually reconcile.

Question 20

AMT adjustments can only increase a corporation's alternative minimum taxable income.

Accepted Answer

AMT adjustments can either increase or decrease a corporation's alternative minimum taxable income, depending on the specific adjustments and preferences involved.

Quiz 11: The Corporate Taxpayer