Question 1

Tanver Corporation, a calendar year corporation, has alternative minimum taxable income of $7 million in 2014 (before adjustment for adjusted current earnings). If Tanver's adjusted current earnings is $16 million, its tentative minimum tax for 2014 is:

Accepted Answer

The tentative minimum tax is calculated as 20% of the excess of alternative minimum taxable income over the exemption amount, which is $40,000 for corporations with alternative minimum taxable income of $150,000 or less (and is reduced by 25% for corporations with alternative minimum taxable income between $150,000 and $1,000,000). 
In this case, the exemption amount is $40,000 reduced by 25% of the excess of alternative minimum taxable income of $7 million over $150,000, which is $40,000 - 25% x $6,850,000 = $1,662,500. 
Therefore, the tentative minimum tax is 20% x ($7 million - $1,662,500 - $16 million) = $2,750,000.

Question 2

Swan 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 Swan's QPAI.

Accepted Answer

The answer of Swan Corporation has gross receipts of $3...

Question 3

Green, Inc., has $2 million in gross receipts of which $1.2 million is DPGR. Its cost of goods sold is $850,000 and other deductions (marketing, administrative) are $350,000. Using the small business simplified deduction method, determine Green's QPAI.

Accepted Answer

The answer of Green, Inc., has $2 million in gross...

Question 4

Moon Corporation sells customized outdoor grills. It purchases various parts and materials from foreign sources for $500 and incurs $160 in labor costs at a factory in Virginia to fabricate and assemble the product. Moon also incurs packaging, selling, and other costs of $40 and sells the grill for $800. If tax year 2014 is involved, calculate Moon's per unit:
a. DPGR
b. QPAI
c. DPAD

Accepted Answer

The answer of Moon Corporation sells customized outdoor grills. It...

Question 5

Ace Corporation incurred the following taxes for the current year:

Accepted Answer

The answer of Ace Corporation incurred the following taxes for...

Question 6

Ford Corporation, a calendar year corporation, has alternative minimum taxable income (before any exemption) of $1.28 million for 2014. The company is not a small corporation. If the regular corporate tax is $209,000, Ford's alternative minimum tax for 2014 is:

Accepted Answer

The alternative minimum tax (AMT) is calculated as 20% of the alternative minimum taxable income (AMTI) for corporations. Therefore, 20% of $1.28 million is $256,000. The AMT is the excess of the tentative minimum tax over the regular tax. Since $256,000 (tentative minimum tax) is greater than $209,000 (regular tax), the AMT is $256,000 - $209,000 = $47,000.

Question 7

Mayberry, Inc. engages in production activities that generate QPAI of $460,000 and taxable income (without taking into account the DPAD and NOL) of $600,000 in 2014. The company also has an NOL carryover to 2014 of $500,000 and qualified W-2 wages of $300,000. Calculate any DPAD.

Accepted Answer

The answer of Mayberry, Inc. engages in production activities that...

Question 8

Bluejay Corporation, a calendar year taxpayer, manufactures and sells candles. It has several factories in the U.S. and one in Jamaica. During 2014, 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 Bluejay's DPGR for 2014?
b. If the gross receipts sourced to the Jamaica plant are $300,000, what is Bluejay's DPGR for 2014?

Accepted Answer

The answer of Bluejay Corporation, a calendar year taxpayer, manufactures...

Question 9

During 2014, Red 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
Red Corporation's alternative minimum tax (AMT) for 2014 is:

Accepted Answer

The answer of During 2014, Red Corporation (a calendar year...

Question 10

Marker Corporation manufactures and sells birdhouses and feeders. The company also sells similar items that are imported from foreign countries. During the current year, Marker had a profit of $700,000 from its own products but a loss of $50,000 from the imported goods.
a. What is Marker's QPAI?
b. What is Marker's DPAD?

Accepted Answer

The answer of Marker Corporation manufactures and sells birdhouses and...

Question 11

The exemption amount is phased out entirely when AMTI reaches:

Accepted Answer

The answer of The exemption amount is phased out entirely...

Question 12

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

Accepted Answer

The answer of What amount of accumulated earnings of a...

Question 13

Ohio Corporation, a calendar year taxpayer, has a beginning balance in accumulated E & P of $3.5 million and current earnings of $1 million. If Ohio can justify accumulations for the needs of the business of $4.1 million, its accumulated earnings credit for ATI purposes is:

Accepted Answer

The accumulated earnings credit is calculated as the lesser of $250,000 or 50% of Ohio's accumulated E & P balance in excess of the reasonable needs of the business, which in this case is $3.5 million - $4.1 million = -$600,000. Since the credit cannot be negative, the accumulated earnings credit is $0. Therefore, Ohio would not be able to reduce its taxable income by the accumulated earnings credit, resulting in a higher tax liability.

Question 14

Which of the following items will be an addition to AMTI in arriving at ACE?

Accepted Answer

Tax-exempt income is added back to AMTI in arriving at ACE. B, C, and D are not added back to AMTI.

Question 15

A small corporation with unused minimum tax credits may use what percentage of regular tax as a minimum credit in 2014?

Accepted Answer

The answer of A small corporation with unused minimum tax...

Question 16

In 2014, May 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) 2,400,000
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
Costs of goods sold 960,000
For 2014, May Corporation's AMTI is:

Accepted Answer

The answer of In 2014, May Corporation (a calendar year...

Question 17

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

Accepted Answer

The answer of For purposes of the penalty tax on...

Question 18

In 2014, Job Corporation, a calendar year taxpayer, has AMTI (before adjustment for adjusted current earnings) of $7 million. If Job Corporation's ACE is $16 million, its tentative minimum tax for 2014 is:

Accepted Answer

To calculate the tentative minimum tax, we need to apply the formula: 0.1 x (AMTI - ACE) + ACE. 
Plugging in the numbers, we get: 
0.1 x ($7 million - $16 million) + $16 million = $2.75 million. 
Therefore, the tentative minimum tax for Job Corporation in 2014 is $2.75 million, which is option B.

Question 19

Which of the following is always personal holding company income?

Accepted Answer

The answer of Which of the following is always personal...

Question 20

In each of the following independent situations, determine the DPAD for 2014 for the corporation involved.
  *Does not include a $120,000 NOL carryover from the prior year.
**Only $60,000 relates directly to manufacturing activities.

Accepted Answer

The answer of In each of the following independent situations,...

Quiz 3: Corporations: Special Situations

Tanver Corporation, a calendar year corporation, has alternative minimum taxable income of $7 million in 2014 (before adjustment for adjusted current earnings) . If Tanver's adjusted current earnings is $16 million, its tentative minimum tax for 2014 is: