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15 Cards in this Set
- Front
- Back
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What is the appropriate tax treatment for US Treasury bonds interest income?
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No difference, not reported on Form 1120, Schedule M-1
Interest income from U.S. Treasury bonds is taxable. |
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What is the appropriate tax treatment for Federal income taxes?
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Expenses recorded on books this year, not deducted on this return
Federal income taxes are not deductible. |
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What is the appropriate tax treatment for bad debt expense - books?
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Expenses recorded on books this year, not deducted on this return
The allowance method of calculating bad debt expense is not permitted for federal income tax purposes. |
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What is the appropriate tax treatment for bad debt expense - tax return?
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Deductions on this return, not charged against book income this year
The direct write-off method is used for tax purposes to deduct bad debts actually written-off. |
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What is the appropriate tax treatment for gain on sale of unimproved land?
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No difference, not reported on Form 1120, Schedule M-1
Gain on the sale of real property (unimproved land) is included in taxable income. |
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What is the appropriate tax treatment for gain on sale of stock?
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No difference, not reported on Form 1120, Schedule M-1
Gain on the sale of stock is fully includible in taxable income. |
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What is the appropriate tax treatment for interest expense - mortgage loan?
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No difference, not reported on Form 1120, Schedule M-1
The mortgage loan interest is deductible on the tax return. |
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What is the appropriate tax treatment for interest expense - loan to purchase municipal bonds?
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Expenses recorded on books this year, not deducted on this return
Interest on a loan to purchase municipal bonds is not deductible because municipal bond interest income is not included in taxable income. |
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What is the appropriate tax treatment for interest expense - line of credit loan?
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No difference, not reported on Form 1120, Schedule M-1
The interest on the line of credit loan is tax deductible. |
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What is the appropriate tax treatment for entertainment expense?
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Expenses recorded on books this year, not deducted on this return
The general rule permits 50% of meals and entertainment to be deducted on the tax return. |
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What is the appropriate tax treatment for recover of prior year's deducted bad debt?
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Income subject to tax, not recorded on books this year
Recovery of an account receivable previously written off for tax purposes is fully taxable. |
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What is the appropriate tax treatment for refund of overpaid state franchise tax - deducted last year?
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No difference, not reported on Form 1120, Schedule M-1
Refund of state franchise tax overpayment previously deducted is fully taxable. |
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What is the appropriate tax treatment for muncipal bond interest income?
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Income recorded on books this year, not included on this return
Municipal bond interest is not taxable for regular tax purposes but is taxable for alternative minimum tax purposes. |
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What is the appropriate tax treatment for insurance proceeds - key person?
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Income recorded on books this year, not included on this return
Key person life insurance proceeds are not taxable for regular tax purposes. |
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What itemsare true regarding the alternative minimum tax?
1. The method of depreciation for commercial real property to arrive at alternative minimum taxable income before the adjusted current earnings (ACE) adjustment is the straight-line method. 2. The corporate exemption amount reduces the alternative minimum taxable income. 3. The ACE adjustment can be a positive or negative amount. 4. Depreciation on personal property to arrive at alternative minimum taxable income before the ACE adjustment is straight-line over the MACRS recovery period. 5. The alternative minimum tax is the excess of the tentative minimum tax over the regular tax liability, 6. Municipal bond interest, other than from private activity bonds, is includable income to arrive at alternative minimum taxable income before the ACE adjustment, 7. The maximum corporate exemption amount for alternative minimum tax purposes is 8150.000 8. The 70% dividends received deduction is available to determine ACE 9. Municipal bond interest is includable income to determine ACE |
1. The method of depreciation for commercial real property to arrive at alternative minimum taxable income before the adjusted current earnings (ACE) adjustment is the straight-line method.
True 2. The corporate exemption amount reduces the alternative minimum taxable income. True 3. The ACE adjustment can be a positive or negative amount. True 4. Depreciation on personal property to arrive at alternative minimum taxable income before the ACE adjustment is straight-line over the MACRS recovery period. False Depreciation on personal property to arrive at alterative minimum taxable income (AMTI) before the ACE adjustment is: (A) Straight-line (if used for regular tax) over the class life, OR (B) 150% declining balance (if straight-line is not used for regular tax) with a switch to straight-line over the class life. Note. The class life used for AMT is not necessarily the same as the recovery period used for regular tax. 5. The alternative minimum tax is the excess of the tentative minimum tax over the regular tax liability True 6. Municipal bond interest, other than from private activity bonds, is includable income to arrive at alternative minimum taxable income before the ACE adjustment. False Municipal bond interest, other than from private activity bonds, is includable income to arrive at the ACE adjustment. 7. The maximum corporate exemption amount for alternative minimum tax purposes is $150,000 False The maximum corporate exemption amount for alternative minimum tax purposes is $40,000 8. The 70% dividends received deduction is available to determine ACE False Not available to determine ACE. 9. Municipal bond interest is includable income to determine ACE True |
