Question: Briefly describe the six step process by

> A corporation commissioned an accounting firm to recalculate the way it accounted for leasing transactions. With the new calculations, the corporation was able to file amended tax returns for the past few years that increased the corporation’s net operat

> What must a decision maker consider when deciding whether to carry back a net operating loss or to elect to forgo the carryback?

> What is the carryback and carryover period for a net operating loss? Does it depend on the size of the corporation? Explain.

> What are the common book-tax differences relating to accounting for capital gains and losses? Do these differences create favorable or unfavorable book-to-tax adjustments?

> How do corporations account for capital gains and losses for tax purposes? How is this different from the way individuals account for capital gains and losses?

> Describe the book-tax differences that arise from nonqualified stock options granted after ASC 718 became effective.

> Describe the book-tax differences that arise from incentive stock options granted after ASC 718 became effective.

> Describe the book-tax differences that arise from incentive stock options and nonqualified stock options granted before ASC 718 became effective.

> Describe how goodwill recognized in an asset acquisition leads to temporary book-tax differences.

> What are the elements that define a tax planning strategy as it applies to determining if a valuation allowance is necessary? Provide an example where a tax planning strategy may be necessary to avoid recording a valuation allowance.

> When a corporation receives a dividend from another corporation does the dividend generate a book-tax difference to the dividend-receiving corporation (ignore the dividends received deduction)? Explain.

> Describe the relation between the book-tax differences associated with depreciation expense and with gain or loss on disposition of depreciable assets.

> Why is it important to be able to determine whether a particular book-tax difference is permanent or temporary?

> What is the difference between permanent and temporary book-tax differences?

> What is the difference between favorable and unfavorable book-tax differences?

> Briefly describe the process of computing a corporation’s taxable income assuming the corporation must use GAAP to determine its book income. How might the process differ for corporations not required to use GAAP for book purposes?

> Can taxable corporations use the cash method of accounting? Explain.

> In general terms, identify the similarities and differences between the corporate taxable income formula and the individual taxable income formula.

> What basic tax planning strategies might a corporation that is expected to owe AMT this year but not next year engage in? How would those strategies change if the corporation expected to be in AMT next year but not in the current year?

> How does a corporation compute its minimum tax credit? How does a minimum tax credit benefit a corporation?

> Which of the four sources of taxable income are considered objective and which are considered subjective? Which of these sources generally receives the most weight in analyzing whether a valuation allowance is necessary?

> How is it possible that a corporation’s marginal AMT rate is greater than 20 percent if the stated AMT rate is 20 percent?

> What is the corporate AMT exemption? Is it available to all corporations? Briefly explain.

> What does the ACE adjustment attempt to capture? How does a corporation determine its ACE adjustment?

> What is the conceptual difference between adjustments and preference items for AMT purposes?

> Briefly describe the process of computing a corporation’s AMT.

> Are any corporations exempt from the AMT? Briefly explain.

> Describe the annualized income method for determining a corporation’s required estimated tax payments. What advantages does this method have over other methods?

> How does a corporation determine the minimum amount of estimated tax payments it must make to avoid underpayment penalties? How are these rules different for large corporations than they are for other corporations?

> What is the due date for a calendar year-end corporation tax return Form 1120 for 2016? Is it possible to extend the due date? Explain.

> How is the Schedule M-1 similar to and different from a Schedule M-3? How does a corporation determine whether it must complete Schedule M-1 or Schedule M-3 when it completes its tax return?

> Briefly describe the four sources of taxable income a company evaluates in determining if a valuation allowance is necessary.

> Describe the three types of controlled groups.

> Explain the controlled group rules in very general terms and indicate what type of behavior the rules are attempting to prevent in terms of computing a corporation’s tax liability.

> Why do the marginal rates in the corporate tax rate schedule increase and then decrease before increasing again?

> What limitations apply to the amount of the allowable dividends received deduction?

> How does a corporation determine the percentage for its dividends received deduction? Explain.

> Why does Congress provide the dividends received deduction for corporations receiving dividends?

> What are common book-tax differences relating to corporate charitable contributions? Are these differences favorable or unfavorable?

> Compute HC Inc.’s current year taxable income given the following information relating to its 2016 activities. Also, compute HC’s Schedule M-1 assuming that HC’s federal income tax expense for book purposes is $30,000. • Gross profit from inventory sales

> Compute MV, Corp.’s 2016 taxable income given the following information relating to its year 1 activities. Also, compute MV’s Schedule M-1 assuming that MV’s federal income tax expense for book purposes is $100,000. • Gross profit from inventory sales of

> XYZ is a calendar-year corporation that began business on January 1, 2016. For 2016, it reported the following information in its current year audited income statement. Notes with important tax information are provided below. Required: a. Reconcile book

> What is the difference between recognition and realization as it applies to the recording of a deferred tax asset on a balance sheet?

> Timpanogos Inc. is an accrual-method calendar-year corporation. For 2015, it reported financial statement income after taxes of $1,152,000. Timpanogos provided the following information relating to its 2016 activities: Life insurance proceeds as a result

> For the current year, Maple Corporation, a C corporation, reports taxable income of $200,000 before paying salary to its sole shareholder Diane. Diane’s marginal tax rate on ordinary income is 35.9 percent (including the additional Medicare tax) and 18.8

> For the current year, Custom Craft Services Inc. (CCS), a C corporation, reports taxable income of $200,000 before paying salary to Jaron the sole shareholder. Jaron’s marginal tax rate on ordinary income is 35 percent and 15 percent on dividend income.

> After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation, sold 18 percent of her JBD stock to ZNO Inc., a C corporation in a similar industry. During the current year JBD reports $1,000,000 of after-tax inco

> Jack would like to organize PPS as either an LLC or as a C corporation generating an 11 percent annual before-tax return on a $100,000 investment. Assume Jack’s marginal tax rate on earned income is 38 percent (including the .9% additional Medicare tax a

> What are the two components of a company’s income tax provision? What does each component represent about a company’s income tax provision?

> What distinguishes an income tax from other taxes?

> How does the fact that most corporations file their financial statements several months before they file their income tax returns complicate the income tax provision process?

> True or False: ASC 740 is the sole source for the rules that apply to accounting for income taxes. Explain.

> What is the purpose behind a valuation allowance as it applies to deferred tax assets?

> Identify some of the reasons why accounting for income taxes is complex.

> Briefly describe the difference between a company’s effective tax rate, cash tax rate, and structural tax rate.

> What is a company’s hypothetical income tax provision and what is its importance in a company’s disclosure of its income tax provision in the tax footnote?

> True or False: A publicly traded company must disclose all of the components of its deferred tax assets and liabilities in a footnote to the financial statements. Explain.

> Under what conditions can a company net its current deferred tax assets with its current deferred tax liabilities on the balance sheet?

> How does a company determine if a deferred tax asset or liability should be classified as current or noncurrent on its balance sheet?

> Why did many companies oppose FIN 48 when it was first proposed?

> Where on the balance sheet does a company report its unrecognized tax benefits?

> True or False: When Congress changes the corporate tax rates, only the current year book-tax temporary differences are measured using the new rates. Explain.

> You have been assigned to compute the income tax provision for Motown Memories, Inc. (MM) as of December 31, 2016. The Company’s federal income tax rate is 34%. The Company’s Income Statement for 2016 is provided below:Motown Memories, Inc.

> True or False: ASC 740 requires that a company treat potential interest and penalties related to an unrecognized tax benefit as part of its income tax provision. Explain.

> Spartan Builders Corporation is a builder of high end housing with locations in major metropolitan areas throughout the Midwest. At June 30, 2016, the company has deferred tax assets totaling $10 million and deferred tax liabilities of $5 million, all of

> Access the 2014 Annual Report for Google, Inc. and answer the following questions. a. Using information from the company’s Income Statement and Income Taxes footnote, what was the company’s effective tax rate for 2014? Show how the rate is calculated. b.

> You have been assigned to compute the income tax provision for Tulip City Flowers, Inc. (TCF) as of December 31, 2016. The company’s federal income tax rate is 34%. The company’s Income Statement for 2016 is provided below:Tulip City Flower

> Golf Corp. (GC), a calendar-year accrual-method corporation, held its directors meeting on December 15 of year 1. During the meeting the board of directors authorized GC to pay a $75,000 charitable contribution to the World Golf Foundation, a qualifying

> Assume that in year 1 Hill Corporation reported a net operating loss of $10,000 that it carried forward to year 2. In year 1, Hill also reported a net capital loss of $3,000 that it carried forward to year 2. In year 2, ignoring any carryovers from other

> WCC, Inc. has a current year (2016) net operating loss of $100,000. It is trying to determine whether it should carry back the loss or whether it should elect to forgo the carryback. How would you advise WCC in each of the following alternative situation

> MWC Corp. is currently in the sixth year of its existence (2016). In 2011 - 2015, it reported the following income and (losses) (before net operating loss carryovers or carrybacks). 2011: ($70,000) 2012: (30,000) 2013: 60,000 2014: 140,000 2015: (25

> What book-tax differences in year 1 and year 2 associated with its capital gains and losses would DEF Inc. report in the following alternative scenarios? Identify each book-tax difference as favorable or unfavorable and as permanent or temporary. a. In

> What book-tax differences in year 1 and year 2 associated with its capital gains and losses would ABD Inc. report in the following alternative scenarios? Identify each book-tax difference as favorable or unfavorable and as permanent or temporary. a. b.

> Assume that on January 1, year 1, XYZ Corp. issued 1,000 nonqualified stock options with an estimated value of $4 per option. Each option entitles the owner to purchase one share of XYZ stock for $14 a share (the per share price of XYZ stock on January 1

> True or False: A company determines its unrecognized tax benefits with respect to a transaction only at the time the transaction takes place; subsequent events are ignored. Explain.

> True or False: All temporary differences have a financial accounting basis. Explain.

> Evon would like to organize SHO as either an S corporation or as a C corporation generating a 9 percent annual before-tax return on a $200,000 investment. Assume individual and corporate tax rates are both 35 percent and individual capital gains and divi

> Evon would like to organize SHO as either an LLC or as a C corporation generating an 11 percent annual before-tax return on a $200,000 investment. Assume individual and corporate tax rates are both 35 percent and individual capital gains and dividend tax

> Kevin and Bob have owned and operated SOA as a C corporation for a number of years. When they formed the entity, Kevin and Bob each contributed $100,000 to SOA. They each have a current basis of $100,000 in their SOA ownership interest. Information on SO

> Rondo and his business associate, Larry, are considering forming a business entity called R&L but they are unsure about whether to form it as a C corporation, an S corporation or as an LLC. Rondo and Larry would each invest $50,000 in the business. Thus,

> Dave and his friend Stewart each own 50 percent of KBS. During the year, Dave receives $75,000 compensation for services he performs for KBS during the year. He performed a significant amount of work for the entity and he was heavily involved in managem

> Mickey, Mickayla, and Taylor are starting a new business (MMT). To get the business started, Mickey is contributing $200,000 for a 40% ownership interest, Mickalya is contributing a building with a value of $200,000 and a tax basis of $150,000 for a 40%

> Damarcus is a 50% owner of Hoop (a business entity). In the current year, Hoop reported a $100,000 business loss. Answer the following questions associated with each of the following alternative scenarios. a. Hoop is organized as a C corporation and Dama

> In its first year of existence (year 1) WCC Corporation (a C corporation) reported taxable income of $170,000 and paid $49,550 of federal income tax. In year 2, WCC reported a net operating loss of $40,000. WCC projects that it will report $800,000 of ta

> In its first year of existence (year 1), SCC corporation (a C corporation) reported a loss for tax purposes of $30,000. Using the corporate tax rate table, determine how much tax SCC will pay in year 2 if it reports taxable income from operations of $20,

> Under what circumstances can a taxpayer meet the ownership and use requirements for a residence but still not be allowed to exclude all realized gain on the sale of the residence?

> Ultimate Comfort Blankets Inc. has had a great couple of years and wants to distribute its earnings while avoiding double taxation on its income. It decides to give its sole shareholder, Laura, a salary of $1,500,000 in the current year. What factors wou

> Nutt Corporation projects that it will have taxable income for the year of $400,000 before incurring any interest expense. Assume Nutt’s tax rate is 35 percent. a. What is the amount of the overall tax (corporate level + shareholder level) on the $400,00

> Jabar Corporation, a C corporation, projects that it will have taxable income of $300,000 before incurring any lease expenses. Jabar’s tax rate is 35 percent. Abdul, Jabar’s sole shareholder, has a marginal tax rate of 39.6 percent on ordinary income and

> Sandy Corp. projects that it will have taxable income of $150,000 for the year before paying any fringe benefits. Assume Karen, Sandy’s sole shareholder, has a marginal tax rate of 35 percent on ordinary income and 15 percent on dividend income. Assume S

> How do shareholder loans to corporations mitigate the double tax of corporate income?

> When a corporation leases property from a shareholder and pays the shareholder at a higher than market rate, how is the excess likely to be classified by the IRS?

> How can leasing property to a corporation be an effective method of mitigating the double tax on corporate income?

> How can fringe benefits be used to mitigate the double taxation of corporate income?

> When a corporation pays salary to a shareholder-employee beyond what is considered to be reasonable compensation, how is the salary in excess of what is reasonable treated for tax purposes? Is it subject to double taxation?

> Explain why the IRS would be concerned that a closely held C corporation only pay its shareholders reasonable compensation.

> What are the ownership and use requirements a taxpayer must meet to qualify for the exclusion of gain on the sale of a residence?

> What limits apply to the amount of deductible salary a corporation may pay to an employee-shareholder?

> Explain why paying a salary to an employee-shareholder is an effective way to mitigate the double taxation of corporate income.

> How many times is income from a C corporation taxed if a retirement fund is the owner of the corporation’s stock? Explain.