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Exam 17: Corporations: Introduction and Operating Rules

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Question 61

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A corporate net operating loss can be carried back 2 years and forward 20 years to offset taxable income for those years.

A) True
B) False

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Question 62

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Contrast the tax treatment of capital gains and losses of C corporations with that of individual taxpayers.

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The definition of capital assets is the ...

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Question 63

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Nancy is a 40% shareholder and president of Robin Corporation, a regular corporation. The board of directors of Robin has decided to pay Nancy a $75,000 bonus for the year based on her outstanding performance. The directors want to pay the $75,000 as salary, but Nancy would prefer to have it paid as a dividend. If Robin Corporation is in the 34% marginal tax bracket and Nancy is in the 33% marginal tax bracket irrespective of the treatment of the bonus, discuss which form of payment would be most beneficial for each party. (Ignore any employment tax considerations.)

During the current year, Maroon Company had $125,000 net profit from operations. Belinda, the sole owner of Maroon, is in the 33% marginal tax bracket. Determine the combined tax burden for Maroon and Belinda under the following independent situations. (Ignore any employment taxes.) a. Maroon Company is a C corporation and all of its after-tax income is distributed to Belinda. b. Maroon Company is a proprietorship and all of its after-tax income is withdrawn by Belinda. c. Maroon Company is an S corporation and all of its after-tax income is distributed to Belinda.

During the current year, Coyote Corporation (a calendar year C corporation) has the following transactions: $\begin{array}{ll}\text { Income from operations } & \$ 260,000 \\\text { Expenses from operations } & 285,000 \\\text { Dividends received from Roadrunner Corporation } & 115,000\end{array}$ a. Coyote owns 5% of Roadrunner Corporation's stock. How much is Coyote Corporation's taxable income (loss) for the year? b. Would your answer change if Coyote owned 25% of Roadrunner Corporation's stock?

Explain the rules regarding the accounting periods available to corporate taxpayers.