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In the case of a corporation that is not a financial institution, which of the following statements is correct with regard to the deduction for bad debts?
Accrual-basis taxpayers (which includes corporations) are required to use the specific charge-off (aka direct charge-off) method for tax purposes. This does not preclude a corporation from using the reserve method for financial reporting purposes, as required.
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What is the maximum amount of capital losses in excess of capital gains that a C corporation may deduct in a year?
For C corporations, capital losses may only be deducted to the extent of capital gains in a given year. Excess capital losses may, however, be carried back three years or forward five (again, only to the extent of capital gains in those years).
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Funnie, Inc. manufactures consumer products and sells them to distributors. Funnie advertises its products to increase sales and enhance the value of its trade name. What is the appropriate treatment for the advertising costs?
Advertising expenses are treated as those incurred in the normal course of business, and for tax purposes are expensed in the period the costs are incurred. There is no amortization of these costs.
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ABC Corp, a calendar-year corporation, reimburses employees for properly substantiated qualifying business meal expenses. The employees are present at the meals, which are neither lavish nor extravagant and the reimbursement is not treated as wages subject to withholdings. What percentage of meal expenses may ABC deduct?
Only 50% of meal expenses are deductible.
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A corporation’s penalty for underpaying federal estimated taxes is:
The penalty for underpayment of federal estimated taxes is not deductible.
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ABC Corp, a calendar year corporation, reimburses employees for properly substantiated qualifying business meal expenses. The employees are present at the meals, which are neither lavish nor extravagant and the reimbursement is not treated as wages subject to withholdings. What percentage of meal expenses may ABC deduct?
Only 50% of meal expenses are deductible.
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A corporation’s penalty for underpaying federal estimated taxes is:
The penalty for underpayment of federal estimated taxes is not deductible.
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For a C Corporation, _____ are able to be expensed or amortized during the organizational process.
Stock sale costs cannot be expensed or amortized during the organizational period, only legal fees necessary to form the company.
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