Acct424 quiz3 - 1. Question:

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1. Question: (TCO 6) Deer Corporation was acquired last year by Lobo Corporation in a transaction causing an  ownership change.  At the time of the acquisition, the fair market value of Deer was $1.5 million and the  Federal long-term tax-exempt rate was 5%.  In the current year, Lobo has $600,000 of taxable income and  excess credits carryovers from Deer amounting to $40,000.  What is Lobo’s Federal income tax for the  year if Lobo is in the 34% tax bracket? Your Answer: $178,500. CORRECT ANSWER $96,000. INCORRECT $55,000. $27,540. None of the above. Instructor Explanation: Lobo’s tax before credits is $204,000 ($600,000 X 34%).  The § 382 limitation for the current year is  $75,000 ($1.5 million X 5%).  The § 382 limitation credit equivalent is $25,500 ($75,000 X 34%).   Therefore, Lobo’s tax liability for the current year is $178,500 ($204,000 – $25,500).   Points Received: 0 of 2 Comments: 2. Question: (TCO 6) ParentCo's separate taxable income was $350,000, and SubCo's was $225,000. Consolidated  taxable income before contributions was $400,000.  Charitable contributions made by the affiliated group  included $15,000 by ParentCo and $20,000 by SubCo.  Compute the group's charitable contribution  deduction. Your Answer:
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Instructor Explanation: 10% X $400,000, but not to exceed the total gifts.   Points Received: 2 of 2 Comments: 3. Question:
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Acct424 quiz3 - 1. Question:

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