A regular corporation must use a calendar year as its tax year unless it has a substantial
business purpose to use a fiscal year. F, p. C:3-2. C:3-2.
Corporations are permitted to deduct $3,000 in net capital losses annually. F, p. C:3-6.
Organizational expenses incurred after 2004 are amortized over five years. F, p. C:3-8.
Corporations may deduct the adjusted basis of inventory plus one-half of the excess of
the propertys FMV over its adjusted basis if the inventory is used for the care of the ill,
needy or infants. T, p. C:3-11. C:3-5.
Corporations may carry charitable contributions in excess of the income limitation
forward for five years. T, p. C:3-13. C:3-6.
The dividends-received deduction is designed to reduce double taxation of corporate
dividends payable to individual shareholders. F, p. C:3-15. C:3-7.
Sparks Corporation receives a dividend of $100,000 from Jill Corporation, a C
Corporation. Sparks owns 70% of Jill Corporation stock. Sparks dividends received
deduction is $80,000. T, p. C:3-15. C:3-8. An election to forgo an NOL carryback must
be made on or before the return due date (including extensions) for the year in which
the NOL is incurred. T, p. C:3-18. C:3-9.
If a controlling shareholder sells depreciable property to a controlled corporation and the
property is depreciable by the purchaser, any gain on the sale is 1231 gain. F, p. C:3-21.
All of the taxable income of a personal service corporation is taxed at a flat 35% rate. T,
p. C:3-24. C:3-11.
Corporate estimated tax payments are due April 15, June 15, September 15 and
January 15. F, p. C:3-35. C:3-12.
A deferred tax asset indicates that a firm will realize the tax benefit of an event
sometime in the future. T, p. C:3-42. C:TB3-1 C:3-13.
Deferred tax liabilities occur when expenses are deductible for book purposes before
tax purposes. F,
Identify which of the following statements is true. a. A corporation is a separate
taxpaying entity that must file a tax return annually. b. A newly formed corporation must
select its basic accounting method. c. The terms "regular corporation" and "C
corporation" are synonymous. d. All of the above are true. d, p. C:3-2. C:3-15.
Identify which of the following statements is false. a. A corporation's fiscal year
generally must end on the last day of the month. b. A fiscal year may not end on
December 31. c. A new corporation can elect a fiscal year that runs from February 16 to
February 15 of the following year. d. A corporations first tax year may not cover a full 12-
month period. c, p. C:3-2. C:3-16.
Identify which of the following statements is true. a. A corporation that is a member of an
affiliated group filing a consolidated tax return may be allowed a tax year which is
different from the group's parent. b. An S corporation must generally use a calendar