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Exam IV TAX 4001 Review.
Exam IV TAX 4001 Review.
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Exam IV TAX 4001 ReviewA Distribution of Appreciated Property to the Stockholders in a Non-Liquidating
Distribution - ANS-Result in a recognized gain to the C corporation
A Distribution of Depreciated Property with a Built in Loss - ANS-Cannot be recognized
by the C corporation in a non-liquidating distribution
Bad debt expense (F/U) - ANS-Unfavorable Book-Tax Difference Example
Bad debt expense (P/T) - ANS-Temporary Book-Tax Difference Example
Capital Losses and Gains - ANS-Example of a separately stated item
Cash Distributions to Partners - ANS-Not considered to be either a non-separately
stated item or a separately stated item because they are not an income item. They are
reductions to the partner's basis only
Charitable Contributions - ANS-Example of a separately stated item
Computing a Corporation's Current Earnings and Profits Account - ANS-Taxable Income
or Net Operating Loss
Add: Exclusions from Taxable Income (the money is in the bank from these items)
Add: Deductions Allowed for Tax Purposes but not for E&P (The Money is in the Bank)
Subtract: Deductions Allowed for E&P but not for Tax (The Money was Spent - Not in
the Bank)
Add or Subtract: Timing Differences Due to Separate Accounting Methods for Taxable
Income and E&P
Corporate Income Tax Formula - ANS-Quite simple; gross income less expenses equals
taxable income
Cost of Goods Sold - ANS-Example of a non-separately stated item
Death benefit from life insurance on key employees (F/U) - ANS-Favorable Book-Tax
Difference Example
Death benefit from life insurance on key employees (P/T) - ANS-Permanent Book-Tax
Difference Example
, Deferred compensation (F/U) - ANS-Unfavorable Book-Tax Difference Example
Deferred compensation (P/T) - ANS-Temporary Book-Tax Difference Example
Depreciation expense (F/U) - ANS-Favorable Book-Tax Difference Example
Depreciation expense (P/T) - ANS-Temporary Book-Tax Difference Example
Depreciation Including Bonus Depreciation - ANS-Example of a non-separately stated
item
Dividends - ANS-Example of a separately stated item
Dividends Received Deduction - ANS-Generally, the lesser of deduction percentage
based on ownership X DRD modified taxable income; Limitation doesn't apply if full
DRD creates or increases a corporation's NOL; generates favorable, permanent
book-tax differences
Dividends to a C Coporation - ANS-Dividends are not deductible to a C corporation and
do not reduce the cost basis of the stock owned.
Earnings and Profits - ANS-Represent a corporation's economic ability to pay dividends
Entertainment expense (F/U) - ANS-Unfavorable Book-Tax Difference Example
Entertainment expense (P/T) - ANS-Permanent Book-Tax Difference Example
Example of a Non-Flow Through Entity - ANS-C corporation
Example of Flow Through Entities - ANS-Any entity that has not elected to be taxed as
a C corporation, and includes partnerships, limited liability companies, and S
corporations. The owners receive a K-1 requiring them to report everything on their own
tax return, and the entity pays no taxes most of the time. The exception is an S
corporation under some circumstances
Favorable Book-Tax Differences - ANS-Decreases taxable income relative to book
income
Federal income tax expense (F/U) - ANS-Unfavorable Book-Tax Difference Example
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