Deck 28: Taxes

Question 1

BET had a taxable income of $135,000 in 2010. What is its tax liability?

A) $22,500
B) $52,650
C) $35,900
D) $15,900

Answer 1

C
Solution:
$22,250 + 0.39($135,000 - $100,000) = $35,900

Question 2

____ received by corporations are normally entitled to a 70 percent exclusion from federal income taxes.

A) Capital gains income
B) Dividend income
C) Loss carrybacks and carryforwards
D) none of the above

Answer 2

B

Question 3

Using the rates in Appendix 2A, determine the tax liability of Coastal Inc. in 2010 if the firm had the following stream of taxable income:

A) $83,450
B) $ 5,250
C) $95,200
D) none of the above

Answer 3

B
Solution:
$35,000(0.15) = $5,250

Question 4

The marginal tax rate for a firm with taxable income of $105,000 is

A) 30%
B) 39%
C) 15%
D) 34%

Question 5

Last year Cell 2 had a net operating loss of $120,000 and a capital loss of $80,000. This year (2010) the firm has an operating income of $230,000 and a capital gain of $40,000. What is Cell 2's tax liability this year? Assume there are no other tax loss carry backs or carry forwards.

A) $4,500
B) $72,950
C) $26,150
D) $12,500

Question 6

For most large U.S. corporations, the maximum capital gain tax rate is

A) 14%
B) 35%
C) 50%
D) 28%

Question 7

For a corporation with ordinary taxable income of $425,000, what is the additional tax liability if $30,000 in dividends is received from shares it holds in another corporation?

A) $7,140
B) $10,200
C) $11,700
D) $3,060

Question 8

Corporate capital gains income is currently taxed at ____ ordinary income.

A) 80 percent of the marginal tax rate on
B) the same marginal rate as
C) 50 percent of the marginal tax rate on
D) none of the above

Question 9

All of the following about taxation of businesses are correct EXCEPT:

A) Business income is taxed at corporate rates.
B) Partnerships are taxed at the same rate as the individual owners.
C) Partnerships have a special tax table.
D) Sole proprietorships are taxed at the same rate as the owner.

Question 10

Capital losses are

A) taxed at the same marginal rate as ordinary income
B) taxed at the 20% rate
C) deductible only against capital gains
D) used to reduce interest payments

Question 11

How does a tax loss affect a corporation as it applies to past and future income?

Question 12

From a tax standpoint, the advantage of an S corporation is that

A) it avoids the double taxation of dividends
B) additional depreciation is allowed
C) it reduces dividend income
D) interest income is not taxed

Question 13

Explain the difference between average tax rate and marginal tax rate.

Question 14

Intercompany dividends, or dividends paid by one corporation to another, are normally entitled to a ____ percent exclusion from Federal income taxes.

A) 15
B) 30
C) 50
D) 70

Question 15

AMX corporation had operating income of $420,000 in 2010; received $12,000 in interest income; paid $22,000 in interest; received $20,000 in dividends; and paid $50,000 in dividends. What is the tax liability for AMX?

A) $141,440
B) $146,200
C) $148,920
D) none of the above

Question 16

How are dividends received by a corporation treated for tax purposes?

Question 17

A corporation's net operating loss may be carried ____ years and ____ years to offset taxable income in those years.

A) back 20, forward 2
B) back 3, forward 5
C) back 5, forward 15
D) back 2, forward 20

Question 18

Keegan Company had operating income of $740,000 in 2010, received $120,000 in preferred stock dividends, $20,000 in interest income and paid $15,000 in interest expenses. What is the tax liability for Keegan?

A) $265,540
B) $294,100
C) $299,200
D) $270,640

Question 19

What is the tax liability in 2010 for a corporation with taxable income of $425,000?

A) $144,500
B) $132,750
C) $150,250
D) $122,700