Question 1

How does the treatment of a liquidation of a subsidiary into its parent corporation differ from the general rule?

Accepted Answer

The answer of How does the treatment of a liquidation...

Question 2

Tara and Jeff wish to form TJ Corporation.They have determined that they need initial capitalization of $1,000,000.What tax issues should they consider when determining whether to issue stock only or some combination of debt and equity?

Accepted Answer

The answer of Tara and Jeff wish to form TJ...

Question 3

A corporation has a tax year ending December 31,2017.When is the due date for the corporate income tax return (with no extensions)?

Accepted Answer

B)Effective for tax years ending after December 31,2015,the due date for corporate tax returns is the 15th day of the fourth month following the close of the tax year.

Question 4

Which corporations are required to file a Schedule M-3?

Accepted Answer

D)Only C corporations with assets of $10,000,000 or more must file a Schedule M-3.

Question 5

Which of the following statements regarding corporate tax return schedules is correct?

Accepted Answer

D)Large corporations must complete Schedule M-3 to reconcile book-tax differences.

Question 6

A new start-up corporation is formed by three individuals.They expect the corporation will experience losses in its first few years.The shareholders will prefer to have the corporation taxed as a C corporation rather than making an S election.

Accepted Answer

The S corporation status may be preferred so that the losses can flow through to the shareholders and be recognized on their individual returns.

Question 7

A closely held corporation will generally prefer to pay higher salary and lower dividends to shareholders who are employed in the business.

Accepted Answer

Salaries are deductible,but dividends are not.

Question 8

Atomic Corporation is enjoying a very profitable year.The board of directors is considering paying either a bonus to the president of the corporation or an extra dividend to the shareholder.Shinil is both the president and the 100% shareholder.Which of the following statements is generally correct with respect to closely held corporations in Atomic's position?

Accepted Answer

A)The corporation can deduct a compensation payment (i.e.the bonus),but it cannot deduct dividend payments.The owner-manager has to increase taxable income by both compensation and dividends.

Question 9

Dividends paid from E&P are taxable to shareholders and are,therefore,deductible by the corporation.

Accepted Answer

Dividends are not deductible by the corporation.

Quiz 32: Corporations