Question 1

Corporate taxable income after December 31, 2017 is taxed at a flat rate of 21%.

Accepted Answer

This is true according to the Tax Cuts and Jobs Act signed into law by President Trump on December 22, 2017. It lowered the corporate tax rate from 35% to a flat rate of 21% for tax years beginning after December 31, 2017.

Question 2

For a corporate taxpayer in the 21% marginal tax bracket, a $20,000 tax credit is equivalent to a $95,238 tax deduction.

Accepted Answer

$20,000 divided by 21% = $95,238.

Question 3

Corporate taxable income earned before December 31, 2017 is taxed using a rate schedule that includes rates ranging from 15% to 39%.

Accepted Answer

This is correct according to the IRS tax rate schedule for corporations.

Question 4

The purpose of Schedule M-1 is to explain the differences between financial statement income and taxable income.

Accepted Answer

Schedule M-1 is a reconciliation schedule used to explain the differences between financial statement income (book income) and taxable income. The purpose of this schedule is to show what adjustments were made to convert the financial statement income to taxable income, such as timing differences, permanent differences, and other adjustments made for tax purposes.

Question 5

Corporations report their taxable income and calculate the federal income tax on Form 1040.

Accepted Answer

Corporations do not use Form 1040 for reporting taxable income and calculating federal income tax. They use Form 1120 or Form 1120S.

Question 6

Hearth, Inc. reported $30,000 of depreciation expense on its financial statements. For federal income tax purposes, it deducted depreciation of $35,000. This book/tax difference would result in an increase to net income per books on the Schedule M-1 or M-3.

Accepted Answer

The book/tax difference in depreciation expense means that taxable income (on the tax return) is lower than book income (on the financial statements). Therefore, the adjustment on the Schedule M-1 or M-3 would decrease net income per books, not increase it.

Question 7

Corporations with more than $1 million taxable income must pay 100% of their current federal income tax liability in the form of quarterly estimate payments to avoid an underpayment penalty.

Accepted Answer

This is true based on the IRS guidelines for estimated tax payments for corporations.

Question 8

A corporation is required to report differences between book and taxable income on either Schedule M-1 or Schedule M-3 of the corporate income tax return.

Accepted Answer

This statement is true. A corporation must report differences between book and taxable income on either Schedule M-1 or Schedule M-3 of the corporate income tax return.

Question 9

The Schedule M-3 reconciliation requires less detailed information than the Schedule M-1 reconciliation.

Accepted Answer

The Schedule M-3 reconciliation requires more detailed information than the Schedule M-1 reconciliation. The Schedule M-3 is intended to provide additional transparency and information about changes in a corporation's financial statements over the course of a year. It includes more detailed information about the company's assets, liabilities, and equity, as well as information about transactions with related parties and international tax issues.

Question 10

If a corporation has accumulated minimum tax credits from tax years prior to 2018, 100 percent of such credits are refundable on their 2018 tax return.

Accepted Answer

The Tax Cuts and Jobs Act allows corporations to claim a partial refund of their accumulated minimum tax credits (AMTC) over several years, starting with the tax year 2018, but not 100 percent in that year.

Question 11

For a consolidated group of corporations, Schedule M-3 reconciles worldwide financial statement net income to the financial statement net income of those corporations permitted to be included in the U.S. consolidated tax return group.

Accepted Answer

Schedule M-3 is used to reconcile worldwide financial statement net income to the financial statement net income of the corporations included in the U.S. consolidated tax return group.

Question 12

Corporate taxable income after December 31, 2017 is taxed using a progressive rate schedule with a top marginal rate of 21%.

Accepted Answer

After December 31, 2017, the Tax Cuts and Jobs Act established a flat corporate tax rate of 21%, replacing the previous progressive rate schedule.

Question 13

The corporate alternative minimum tax was designed to insure that corporations with substantial economic income paid their fair share of the federal tax burden.

Accepted Answer

The corporate alternative minimum tax (AMT) was indeed designed to ensure that corporations with substantial economic income paid their fair share of the federal tax burden. It was first enacted as part of the Tax Reform Act of 1986 and has since undergone several changes. The goal of the AMT is to prevent corporations from using tax deductions and credits to significantly reduce their tax liability, which could result in very low effective tax rates or even zero tax liability. Instead, the AMT requires corporations to calculate their tax liability twice, once under regular tax rules and once under AMT rules, and pay the higher of the two amounts.

Question 14

The minimum tax credit is an example of a nonrefundable credit.

Accepted Answer

The answer of The minimum tax credit is an example...

Question 15

Most tax credits for which a corporate taxpayer would be eligible are nonrefundable.

Accepted Answer

Nonrefundable tax credits can reduce a corporation's tax liability but cannot create a refund beyond the tax liability.

Question 16

A corporate taxpayer would prefer a $50,000 deduction to a $50,000 credit.

Accepted Answer

A tax credit directly reduces the tax liability dollar-for-dollar, while a deduction reduces taxable income. Therefore, a $50,000 credit is generally more beneficial than a $50,000 deduction.

Question 17

Generally, the corporate income tax is computed using a regressive rate schedule.

Accepted Answer

The corporate income tax is computed using a progressive rate schedule, which means that as the taxable income increases, the tax rate also increases.

Question 18

Angel Corporation's current-year regular tax liability is $40,000. Angel is eligible for a general business credit of $45,000. The corporation will receive a $5,000 refund of federal income tax.

Accepted Answer

Angel Corporation can use the general business credit up to the amount of its tax liability, which is $40,000, reducing its tax liability to $0. The excess $5,000 cannot be refunded but may be carried back or forward to other tax years under general business credit rules.

Question 19

A corporation that is unable to meet its original filing deadline may obtain an automatic twelve-month extension of the time to file its federal income tax return.

Accepted Answer

A corporation can obtain an automatic six-month extension, not twelve months, for filing its federal income tax return by submitting Form 7004 by the original due date of the return.

Question 20

A corporation with a June 30 fiscal year earns $1 million for its tax year ended June 30, 2018. Regular tax liability on this income is $210,000.

Accepted Answer

The answer of A corporation with a June 30 fiscal...

Quiz 11: The Corporate Taxpayer