c16 - Chapter 16 Corporate Operations INSTRUCTORS MANUAL...

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Chapter 16 Corporate Operations INSTRUCTOR’S MANUAL Learning Objectives 1. Describe the corporate income tax formula, compare and contrast the corporate to the individual tax formula, and discuss tax considerations relating to corporations’ accounting periods and accounting methods. 2. Identify common book-tax differences, distinguish between permanent and temporary differences, and compute a corporation’s taxable income and regular tax liability. 3. Describe a corporation’s tax return reporting and estimated tax payment obligations. 4. Calculate a corporation’s alternative minimum tax liability. Teaching Suggestions This chapter helps students understand how to compute corporation taxable income. The basic approach assumes that the corporation computes book income under GAAP accounting and the text highlights many book-tax adjustments that corporations will make to book income in computing taxable income. The chapter points out that not all book-tax differences are the same. Some are permanent and some are temporary. This has implications for reporting the differences (on the Schedule M-3), tracking the differences, and in computing the corporation’s income tax provision. Many of the book-tax differences discussed early in the chapter relate to business income and deduction items and methods discussed in the business income, deductions, and accounting methods chapter. The chapter assumes that the students have already worked through the business chapter. As a heads up, students may struggle with the following topics: Corporations may report book-tax differences associated with the reporting income from stock investments - how much income to report for books vs. the amount of dividend received. Accounting for nonqualified stock options under ASC 718. Deductions allowed in determining a corporation’s NOL for the year Allowable deductions in determining the taxable income limit for the charitable contribution limitation. The limitation on the dividends received deduction and the allowable deductions in determining DRD modified taxable income. Note that you may want to do problems that don’t involve complicated deduction sequencing (that is, focus on 10% of taxable income before the charitable contribution but don’t worry about the DRD, DPAD, NOL carrybacks, and capital loss carrybacks). The annualized income method for determining estimated tax payment requirements. The ACE adjustment for AMT purposes. The comprehensive problems are very useful for the students to help them see the big picture. Note that both problems 86 and 87 have students compute the AMT. If you are not covering the AMT, you may want to have them skip this requirement.
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Assignment Matrix Learning Objectives Text Feature Difficulty LO1 LO2 LO3 LO4 Research Planning Tax Forms DQ16-1 10 min. Easy X DQ16-2 5 min. Easy X DQ16-3 10 min. Easy X DQ16-4 10 min. Easy X DQ16-5 5 min. Easy X DQ16-6 10 min. Easy X DQ16-7 10 min. Easy X DQ16-8 10 min. Easy X DQ16-9 10 min. Easy X DQ16-10 10 min. Medium X DQ16-11 10 min. Easy X
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