Law question data bank

271 #33
In 2011, Fay Corporation (a calendar year taxpayer) had the following
transactions:

Taxable income

$4,000,000

Mining exploration costs claimed

1,000,000

Percentage depletion claimed (the property had a
zero adjusted basis)

1,400,000

Donation of stock held since 1988 as investment
(basis of $100,000

and fair
market value of $400,000) to a qualified charity

400,000

For 2011, Fay Corporation’s AMTI is:

a.
$6,300,000.
b. $7,150,000.
c. $7,250,000.
d. $7,300,000.
e. None of the above.

272 #34
During 2011, Gold Corporation (a calendar year taxpayer) has $4,000,000 of
taxable income and the following transactions:

AMTI (not including adjusted current earnings)

$5,000,000

Adjusted current earnings

8,000,000

Gold Corporation’s alternative minimum
tax (AMT) for 2011 is:

a.
$1,360,000.
b. $700,000.
c. $500,000.
d. $90,000.
e. None of the above.

273 #35
Ravi Corporation, a calendar year taxpayer, has AMTI (before adjustment for
adjusted current earnings) of $6 million for 2011. If Ravi Corporation’s ACE is
$15 million, its tentative minimum tax for 2011 is:

a.
$2.02 million.
b. $2.55 million.
c. $3.45 million.
d. $4.2 million.
e. None of the above.

274 #36
Tanver Corporation, a calendar year corporation, has alternative minimum
taxable income of $7 million in 2011 (before adjustment for adjusted current
earnings). If Tanver’s adjusted current earnings is $16 million, its tentative
minimum tax for 2011 is:

a.
$310,000.
b. $2,750,000.
c. $6,750,000.
d. $7,000,000.
e. Some other amount.

275 #37
Which entity is subject to the ACE provisions?

a.
S corporation.
b. Real estate investment trust (REITs).
c. Regulated investment companies.
d. Real estate mortgage investment
conduits.
e. None of the above.

276 #38
The exemption amount is phased out entirely when AMTI reaches:

a.
$40,000.
b. $310,000.
c. $1,000,000.
d. $5,000,000.
e. Some other amount.

277 #39
For purposes of the penalty tax on accumulated earnings under § 531, reasonable
needs of the business does not
include:

a.
Product liability losses.
b. Self-insurance.
c. Loans to suppliers and customers.
d. Loans to shareholders.
e. Plant expansion.

278 #40
Cave Corporation, a calendar year taxpayer, has a beginning balance in
accumulated E & P of $3.5 million and current earnings of $1 million. If
Cave can justify accumulations for the needs of the business of $3.7 million,
its accumulated earnings credit for ATI purposes is:

a.
$3.7 million.
b. $250,000.
c. $200,000.
d. $0.
e. None of the above.

279 #41
Maroon Corporation incurred the following taxes for the year 2011:

Regular tax liability

$187,000

Tentative minimum tax

156,000

Personal holding company tax

67,000

Accumulated earnings tax

65,400

Maroon Corporation’s total tax liability is:

a.
$187,000.
b. $254,000.
c. $265,000.
d. $421,000.
e. Some other amount.

280 #42
What amount of accumulated earnings of a manufacturing corporation is
considered within the reasonable needs of a business without the corporation
having to show a bona fide business reason for the accumulation?

a.
$150,000 or less.
b. $200,000 or less.
c. $250,000 or less.
d. $300,000 or less.
e. None of the above.

281 #43
Blue, Inc., a calendar year closely held corporation, is not a PHC. If the
company reports the following items, the accumulated taxable income is:

Taxable income

$200,000

Long-term capital gain (net of tax)

18,300

Federal income tax on LTCG

11,700

Dividends received deduction

18,000

Accumulated earnings credit

80,000

Federal income taxes

65,150

a.
$54,550.
b. $62,850.
c. $80,850.
d. $109,700.
e. None of the above.

282 #44
Which of the following is alwayspersonal
holding company income?

a.
Gas royalties.
b. Rent income.
c. Dividends
d. Personal service contract income.
e. All of the above.

283. CHAPTER
3—CORPORATIONS: SPECIAL SITUATIONS Question PR #1
Chase Corporation manufactures and sells birdhouses and feeders. The company
also sells similar items that are imported from foreign countries. During the
current year, Chase had a profit of $600,000 from its own products but a loss
of $50,000 from the imported goods.

a.

What is
Chase’s QPAI?

b.

What is
Chase’s DPAD in 2011?

284. CHAPTER
3—CORPORATIONS: SPECIAL SITUATIONS Question PR #2
Emerald, Inc. engages in production activities that generate QPAI of $560,000
and taxable income (without taking into account the DPAD and NOL) of $700,000
in 2011. The company also has an NOL carryover to 2011 of $600,000 and
qualified W-2 wages of $350,000. Calculate any DPAD.

285. CHAPTER
3—CORPORATIONS: SPECIAL SITUATIONS Question PR #3
In each of the following independent situations, determine the DPAD for 2011
for the corporation involved.

Taxpayer

QPAI

TI

W-2 wages

a.

Siskin

$400,000

$500,000

$ 30,000

b.

Ibis

800,000

700,000

130,000

c.

Scamp

700,000

900,000

200,000

d.

Pipits

900,000

900,000

280,000

e.

Puffin

900,000

900,000

200,000

Does not
include a $120,000 NOL carryover from the prior year.

Only $60,000
relates directly to manufacturing activities.

286. CHAPTER
3—CORPORATIONS: SPECIAL SITUATIONS Question PR #4
Robin Corporation, a calendar year taxpayer, manufactures and sells candles. It
has several factories in the U.S. and one in Jamaica. During 2011, it had DPGR
of $4.1 million from the U.S. factories.

a.

If the gross
receipts from the products made in Jamaica are $200,000, what is Robin’s DPGR
for 2011?

b.

If the gross
receipts sourced to the Jamaica plant are $300,000, what is Robin’s DPGR for
2011?

287. CHAPTER
3—CORPORATIONS: SPECIAL SITUATIONS Question PR #5
Ecru Corporation sells customized outdoor grills. The company purchases various
parts and materials from foreign sources for $750 and incurs $240 in labor
costs at a factory in North Carolina to fabricate and assemble the product.
Ecru also incurs packaging, selling, and other costs of $60 and sells the grill
for $1,200. If tax year 2011 is involved, calculate Ecru’s per unit:

a.

DPGR

b.

QPAI

c.

DPAD

288. CHAPTER
3—CORPORATIONS: SPECIAL SITUATIONS Question PR #6
Scarlet, Inc., has $4 million in gross receipts of which $2.4 million is DPGR.
CGS is $1,700,000 and other deductions (marketing, administrative) are
$700,000. Using the small business simplified deduction method, determine
Scarlet’s QPAI.

289. CHAPTER
3—CORPORATIONS: SPECIAL SITUATIONS Question PR #7
Maize Corporation has gross receipts of $3 million of which $1 million are
non-DPGR. CGS identified with DPGR is $1.3 million, while overall selling and
administrative expenses are $600,000. Under the simplified deduction method,
determine Maize’s QPAI.

290. CHAPTER
3—CORPORATIONS: SPECIAL SITUATIONS Question PR #8
Swan Corporation has average gross receipts of $5.5 million, $4.7 million, and
$4.6 million in 2008, 2009, and 2010, respectively. Is the company a small
corporation with respect to the AMT?