Question 1

In 2010,Jay Corporation (a calendar year taxpayer)had the following transactions:

For 2010,Jay Corporation's AMTI is:

Accepted Answer

Jay Corporation's taxable income for 2010 is: 
Gross Income: $10,000,000 
Cost of Goods Sold: ($3,500,000) 
Depreciation: ($800,000) 
Charitable Contribution: ($150,000) 
Interest Income: $500,000 
Dividend Income: $300,000 
Net Capital Gain: $1,500,000 
Total Deductions: ($1,100,000)

= $7,250,000

Since there are no adjustments to AMTI given, we can assume that Jay Corporation's AMTI is the same as its taxable income, which is $7,250,000. Therefore, the best choice is D.

Question 2

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

Accepted Answer

Tax-exempt income is added to AMTI to arrive at ACE, as it is not included in the calculation of AMTI. Federal income tax, excess capital loss, and excess charitable contributions are all subtracted from AMTI to arrive at ACE.

Question 3

Which entity is subject to the ACE provisions?

Accepted Answer

The ACE provisions apply only to C corporations, thus the entities listed (S corporations, REITs, regulated investment companies, and real estate mortgage investment conduits) are not subject to these provisions.

Question 4

Which statement is false?

Accepted Answer

The starting point for computing ACE is not taxable income. Instead, it is AMTI.

Question 5

Which of the following items will be added to unadjusted AMTI in arriving at ACE?

Accepted Answer

The other items (b.,c.,and d.)have no effect.

Question 6

Azure Corporation incurred the following taxes for the year 2010:

Azure Corporation's total tax liability is:

Accepted Answer

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

Question 7

Which statement,if any,is false?

Accepted Answer

An S corporation is not subject to corporate-level taxation, including the AMT. Instead, the income or loss of the S corporation is passed through to the shareholders, who report it on their individual tax returns.

Question 8

The exemption amount is phased out entirely when AMTI reaches:

Accepted Answer

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

Question 9

Which AMT adjustment would only be negative?

Accepted Answer

The answer of Which AMT adjustment would only be negative?
...

Question 10

During 2010,Brown Corporation (a calendar year taxpayer)has $4,000,000 of taxable income and the following transactions:

Brown Corporation's alternative minimum tax (AMT)for 2010 is:

Accepted Answer

The answer of During 2010,Brown Corporation (a calendar year taxpayer)has...

Question 11

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?

Accepted Answer

According to IRC Section 531, a manufacturing corporation can accumulate earnings up to $250,000 without having to show a bona fide business reason for the accumulation.

Question 12

Which of the following items will have an effect (add or subtract)on unadjusted AMTI to arrive at ACE?

Accepted Answer

The answer of Which of the following items will have...

Question 13

A small corporation with unused minimum tax credits may use what percentage of regular tax as a minimum credit in 2010?

Accepted Answer

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

Question 14

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

Accepted Answer

$3.7 million (reasonable needs)- $3.5 million (beginning balance in E & P)= $200,000 accumulated earnings credit.

Question 15

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

Accepted Answer

Loans to shareholders are not considered reasonable needs of the business for purposes of the penalty tax on accumulated earnings. The other options listed can be considered as reasonable needs of the business.

Question 16

Which of the following items will be a deduction from unadjusted AMTI in arriving at ACE?

Accepted Answer

The answer of Which of the following items will be...

Question 17

Which of the following would not be a positive tax preference item in 2009?

Accepted Answer

Private activity bond interest income is not a positive tax preference item in 2009. Positive tax preference items are tax deductions and exclusions that are not available to all taxpayers, and therefore may be seen as preferential treatment for certain types of income or investments. The other options listed are all examples of positive tax preference items.

Question 18

Chev Corporation,a calendar year corporation,has alternative minimum taxable income (before any exemption)of $1.28 million for 2010.The company is not a small corporation.If the regular corporate tax is $211,050,Chev's alternative minimum tax for 2010 is:

Accepted Answer

The alternative minimum tax (AMT) is calculated as 20% of the alternative minimum taxable income (AMTI) for corporations. For Chev Corporation, 20% of $1.28 million is $256,000. The AMT is the excess of the tentative minimum tax over the regular tax, which is $256,000 - $211,050 = $44,950.

Question 19

Tanver Corporation,a calendar year corporation,has alternative minimum taxable income of $7 million in 2010 (before adjustment for adjusted current earnings).If Tanver's adjusted current earnings is $16 million,its tentative minimum tax for 2010 is:

Accepted Answer

The tentative minimum tax for corporations is the greater of 20% of alternative minimum taxable income or the excess of 25% of adjusted current earnings over the regular tax liability (if any).

In this case, 20% of $7 million AMTI is $1.4 million.

25% of $16 million ACE is $4 million.

Since $4 million is greater than $1.4 million, the tentative minimum tax for Tanver Corporation is $4 million.

Question 20

Gem Corporation,a calendar year taxpayer,has AMTI (before adjustment for adjusted current earnings)of $6 million for 2010.If Gem Corporation's ACE is $15 million,its tentative minimum tax for 2010 is:

Accepted Answer

To calculate the tentative minimum tax (TMT), we need to first calculate the ACE limitation. The ACE limitation is 75% of the excess of ACE over AMTI.

ACE limitation = 75% x ($15 million - $6 million) = $6.75 million

The TMT is then the greater of the regular tax or 20% of the excess of AMTI over the ACE limitation.

Regular tax is not given in the question, so we need to calculate the excess of AMTI over the ACE limitation:

Excess of AMTI over ACE limitation = $6 million - $6.75 million = -$750,000

Since this is negative, the TMT is simply the regular tax, which is less than zero. Therefore, the TMT is zero.

So, none of the answer choices are correct.

Quiz 3: Corporations: Special Situations

In 2010,Jay Corporation (a calendar year taxpayer) had the following transactions: For 2010,Jay Corporation's AMTI is:

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

Which entity is subject to the ACE provisions?

Which statement is false?

Which of the following items will be added to unadjusted AMTI in arriving at ACE?

Azure Corporation incurred the following taxes for the year 2010: Azure Corporation's total tax liability is:

Which statement,if any,is false?

The exemption amount is phased out entirely when AMTI reaches:

Which AMT adjustment would only be negative?

During 2010,Brown Corporation (a calendar year taxpayer) has $4,000,000 of taxable income and the following transactions: Brown Corporation's alternative minimum tax (AMT) for 2010 is:

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?

Which of the following items will have an effect (add or subtract) on unadjusted AMTI to arrive at ACE?

A small corporation with unused minimum tax credits may use what percentage of regular tax as a minimum credit in 2010?

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

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

Which of the following items will be a deduction from unadjusted AMTI in arriving at ACE?

Which of the following would not be a positive tax preference item in 2009?

Chev Corporation,a calendar year corporation,has alternative minimum taxable income (before any exemption) of $1.28 million for 2010.The company is not a small corporation.If the regular corporate tax is $211,050,Chev's alternative minimum tax for 2010 is:

Tanver Corporation,a calendar year corporation,has alternative minimum taxable income of $7 million in 2010 (before adjustment for adjusted current earnings) .If Tanver's adjusted current earnings is $16 million,its tentative minimum tax for 2010 is:

Gem Corporation,a calendar year taxpayer,has AMTI (before adjustment for adjusted current earnings) of $6 million for 2010.If Gem Corporation's ACE is $15 million,its tentative minimum tax for 2010 is: