Card 0 of 20
Presto Corp., a calendar year domestic C corporation, is not a personal holding company. For purposes of the accumulated earnings tax, Presto has accumulated taxable income for Year 3. Which step(s) can Presto take to eliminate or reduce any Year 3 accumulated earnings tax?
I. Demonstrate that the “reasonable needs” of its business require the retention of all or part of the Year 3 accumulated taxable income.
II. Pay dividends by April 15, Year 4.
To minimize the impact of the accumulated earnings tax, a corporation can argue on the basis of “reasonable needs” of business before the IRS, and provide a specific, definite, and feasible plan for the use of such retained earnings. Additionally, dividends paid by the corporate tax return deadline which reduce accumulated earnings will also reduce or eliminate the tax on those earnings.
Compare your answer with the correct one above
The accumulated earnings tax can be imposed:
The accumulated earnings tax is directed primarily at regular C corporations. The number of shareholders is irrelevant. Personal holding companies and S corporations are exempt from this tax.
Compare your answer with the correct one above
The accumulated earnings tax is paid at which rate?
The rate for the accumulated earnings tax is the same as the rate individual taxpayers pay on dividends, or 20%. This is because the accumulated earnings tax is directed at regular corporations who hold an excess of retained earnings instead of being distributed as dividends to shareholders.
Compare your answer with the correct one above
When a Subchapter S corporation does not have any _________, the amount distributed to a shareholder will decrease that shareholder’s basis in the stock.
When an S Corp does not have any accumulated E&P, the distribution to the shareholder will decrease its basis in the company stock.
Compare your answer with the correct one above
Clarett, who owned a retail business, left a note on a desk Clarett thought was occupied by Franklen. The note stated, "Please contract to purchase 20,000 widgets at the best possible price from Eisen Corp. for delivery in March." The desk was actually being used by Saranz, who made a contract for the purchase of the widgets as specified. Saranz had little negotiating experience and contracted for a high price. Which of the following statements is correct regarding the authority held by Saranz?
Since the note did not specify the intended agent (Franklen) and was left on Saranz’s desk, the note granted actual authority to Saranz to act on Clarett’s behalf as an agent. The agent’s skill in negotiating has no bearing on whether the contract is enforceable when actual authority has been given to the agent.
Compare your answer with the correct one above
Tim’s Real Estate, Inc., employs David to buy city property for a future apartment complex. Through Construction Co., David’s own corporation, David secretly purchases a city property that David discovered while searching for property for Tim. David later arranges to have Construction Co. sell the property to Tim for more than Construction Co. paid for it. David has breached the duty of:
The duty of loyalty requires than an agent not engage in self-dealing or competing against the principal. The only other option that is a defined duty of an agent is care, in which the agent must carry out the agency by avoiding negligence.
Compare your answer with the correct one above
Wilson gives Sussex power of attorney. In general, the power of attorney:
Power of attorney is generally used to provide an agent with authority to perform specific tasks. A power of attorney may be anyone, and only the principal must sign the power of attorney. Power of attorney lapses upon the death of the principal.
Compare your answer with the correct one above
What is the doctrine under which a corporation is made liable for the torts of the corporation’s employees when the torts are committed within the scope of employment?
Under the doctrine of respondeat superior, a principal, including a corporation can be held liable for an employee’s tort committed within the scope of employment.
Compare your answer with the correct one above
Which of the following conditions must be met to form an agency?
Formation of an agency relationship requires a principal who has contractual capacity.
Compare your answer with the correct one above
Usually, an agent will be liable under a contract with a third party when the agent is acting on the behalf of who?
Generally, the agent would not be held liable on the contract that he or she makes on the principal’s behalf if the principal is disclosed however the agent would be personally liable on contracts made when the principal is undisclosed.
Compare your answer with the correct one above
West is single, has no dependents, and does not itemize. West provides the following information regarding his current-year’s return:
What is the amount of West’s AMT tax preference items?
Among the options provided, only the percentage depletion in excess of a property’s adjusted basis is included as an AMT tax preference item.
Compare your answer with the correct one above
The credit for prior year AMT liability may be carried:
Like capital losses for individuals, AMT credits may be carried forward indefinitely for individual taxpayers.
Compare your answer with the correct one above
Which of the following is not an adjustment or preference to arrive at alternative minimum taxable income?
Adjustments and preferences to arrive at AMTI include many items, such as passive activity losses, accelerated depreciation, net operating loss of an individual taxpayer, state and local taxes, the standard deduction, and private activity bond interest income. Deductible contributions to IRAs are treated the same under AMTI as for taxable income.
Compare your answer with the correct one above
The credit for prior year AMT liability may be carried:
AMT paid can be claimed as a credit against other years if the tax was paid on items that increased AMT that year but will reverse in later years. The credit is carried forward indefinitely.
Compare your answer with the correct one above
Of the following is not an adjustment or preference to arrive at AMTI?
Deductible contributions to individual retirement accounts are not an adjustment or preference in calculation a taxpayer’s AMTI. They are an adjustment in calculating adjusted gross income for regular tax purposes.
Compare your answer with the correct one above
Of the following, which are allowable itemized deductions for computing AMT income?
Both of these options are normal itemized deductions (Sch A) however not all itemized deductions are included in AMTI.
Compare your answer with the correct one above
Which of the following requirements must be met for creditors to file an involuntary bankruptcy petition under Chapter 7 of the federal Bankruptcy Code?
The primary requirement for a petition of involuntary bankruptcy is that creditors must demonstrate that a debtor has defaulted on repayments of debts. Involuntary petitions must be filed only by creditors who are owed, individually or in the aggregate, at least $16,750 in unsecured, undisputed debt. If there are fewer than 12 creditors, the aggregate threshold of unsecured debt is $16,750; if there are more than 12, at least three who are owed $16,750 in the aggregate must join the petition.
Compare your answer with the correct one above
A reorganization under Chapter 11 of the federal Bankruptcy Code requires all of the following except the:
The primary feature of reorganization under Chapter 11 is to create a plan between the debtor and creditors which best satisfies all parties involved. Liquidation does not occur, and the debtors maintains control of the debtor’s assets.
Compare your answer with the correct one above
Which of the following statements is correct with respect to the reorganization provisions of Chapter 11 of the federal Bankruptcy Code?
Under Chapter 11, a debtor may file voluntarily, or its creditors may file an involuntary petition. Under a voluntary petition, the debtor need not be insolvent, though individuals must pass income tests to determine eligibility. Chapter 11 does not usually involve a trustee, and the debtor has an exclusive right to file a plan in the first 120 days after filing a petition.
Compare your answer with the correct one above
A debtor who filed voluntarily and received a discharge in bankruptcy under the provisions of Ch 7 of the Federal Bankruptcy Code:
An inheritance received within 180 days after the filing of the petition must be surrendered for distribution to the creditors.
Compare your answer with the correct one above