A Loss Incurred by a Corporation
A loss incurred by a corporation A) must be carried back 2 years before being carried forward for 5 years. B) can be carried forward indefintely. C) can be carried back 5 years and forward 3 years. D) cannot be used to reduce taxes in other years except with special permission from the IRS. E) can be carried back 3 years or forward 10 years,whichever is more advantageous to the firm.
Which of the following statements is CORRECT? A) Since companies can deduct dividends paid but not interest paid,our tax system favors the use of equity financing over debt financing,and this causes companies' debt ratios to be lower than they would be if interest and dividends were both deductible. B) Interest paid to an individual is counted as income for federal tax purposes and taxed at the individual's regular tax rate,which in 2018 could go up to 37%,but qualified dividends received are taxed at a maximum rate of 15% for most individuals. C) The maximum federal tax rate on corporate income in 2018 was 50%. D) Corporations obtain capital for use in their operations by borrowing and by raising equity capital,either by selling new common stock or by retaining earnings.The cost of debt capital is the interest paid on the debt,and the cost of the equity is the dividends paid on the stock.Both of these costs are deductible from income when calculating income for tax purposes. E) The maximum federal tax rate on personal income in 2018 was 50%.
Which of the following statements is CORRECT? A) The income of certain small corporations that qualify under the Tax Code is completely exempt from corporate income taxes.Thus,the federal government receives no tax revenue from these businesses,even though they report high accounting profits. B) All businesses,regardless of their legal form of organization,are taxed under the Business Tax Provisions of the Internal Revenue Code. C) Small corporations that qualify under the Tax Code can elect not to pay corporate taxes,but then each stockholder must report his or her pro rata shares of the firm's income as personal income and pay taxes on that income. D) Congress recently changed the tax laws to make dividend income received by individuals exempt from income taxes.Prior to the enactment of that law,corporate income was subject to double taxation,whereby the firm was taxed on the corporation's income and stockholders were taxed again on this income when it was paid to them as dividends. E) All corporations other than non-profits are subject to corporate income taxes,which are 15% for the lowest amounts of income and 38% for the highest income amounts.
Which of the following statements is CORRECT? A) Retained earnings,as reported on the balance sheet,represent the amount of cash a company has available to pay out as dividends to shareholders. B) 50% of the interest received by corporations is excluded from taxable income. C) 50% of the dividends received by corporations is excluded from taxable income. D) Because taxes on long-term capital gains are not paid until the gain is realized,investors must pay the top individual tax rate on that gain. E) The corporate tax system favors equity financing,as dividends paid are deductible from corporate taxes.