25 May Question 1. A personal service corporation with taxable income of $100,000
Question
1. A personal service corporation with taxable income of $100,000 will have a tax liability of $22,250.
a. True
b. False
2. Ed, an individual, incorporates two separate businesses that he owns by establishing two new C corporations. Each corporation generates taxable income of $50,000. As a general rule, each corporation will have a tax liability of $11,125.
a. True
b. False
3. A calendar year C corporation can receive an automatic 9-month extension to file its corporate return (Form 1120) by timely filing a Form 7004 for the tax year.
a. True
b. False
4. A corporation must file a Federal income tax return even if it has no taxable income for the year.
a. True
b. False
5. Schedule M-1 is used to reconcile net income as computed for financial accounting purposes with taxable income reported on the corporation’s income tax return.
a. True
b. False
6. An expense that is deducted in computing net income per books but not deductible in computing taxable income is a subtraction item on Schedule M-1.
a. True
b. False
7. On December 31, 2014, Flamingo, Inc., a calendar year, accrual method C corporation, accrues a bonus of $50,000 to its president (a cash basis taxpayer), who owns 75% of the corporation’s outstanding stock. The $50,000 bonus is paid to the president on February 2, 2015. For Flamingo’s 2014 Form 1120, the $50,000 bonus will be a subtraction item on Schedule M-1.
a. True
b. False
8. Income that is included in net income per books but not included in taxable income is a subtraction item on Schedule M-1.
a. True
b. False
9. Schedule M-2 is used to reconcile unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at the end of the year.
a. True
b. False
10.A corporation with $5 million or more in assets must file Schedule M-3 (instead of Schedule M-1).
a. True
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