Chapter 11 Tax Accounting reviewed
questions with correct answers.
What is the corporate tax rate in the US for 2018? ANS - A flat tax of 21%
Prior to 2018, what was the setup of the corporate tax rate? ANS - Eight tax brackets with progressive
marginal tax rate ranging from 15-39%
What is the tax rate for a personal service corporation? ANS - Flat tax of 31%
A personal service corporarion is... ANS - Substantially employee-owned and engages in one of the
following activities:
1) Health,
2) Law,
3) Engineering,
4) Architecture,
5) Accounting,
6) Actuarial Science,
7) Performing arts,
8) Consulting
If a corporation incurs a net capital gain, what is the tax treatment? ANS - It is treated as ordinary
income and taxed at 21%
What is the purpose of an Net Operating Loss (NOLs)? ANS - Carry forward them to offset future taxable
income
NOLs generated after Dec. 31, 2017 is... ANS - Limited to 80% of the current year's taxable income
, NOLs generated before Jan 1, 2018 can be used... ANS - 100%
Carryforward and carryback rules for NOLS generated after Dec. 31, 2017... ANS - Carryback provisions
are repealed and NOLs can be carried forward indefinitely
Prior to 2018 carryback and carryforward ANS - Carryback 2 years and carryforward 20 years
Do the old NOL rules still apply? ANS - Yes, on NOLs generated prior to Jan 1, 2018
What are the "special deductions" that corporations are allowed to take? ANS - 1) Dividends received
deduction,
2) The deduction for organizational expenditures and start-up costs
What deduction is limited to corporations? ANS - Charitable Contributions
Why does the dividends received deduction exist? ANS - To avoid triple taxation
Dividends received deduction is allowed based upon... ANS - Ownership
The dividends received deduction is limited to... ANS - The applicable deduction percentage X the
corporation's taxable income (calculated before dividends received deduction, NOL deduction, and
capital loss carrybacks)
What makes a corporation ineligible for the dividend received deduction? ANS - If the receiving
corporation has a net operating loss after reducing taxable income by the dividends received dedcution
Organizational expenditures pertain to... ANS - LLCs, corporations and partnerships
Start up costs can be incurred by any organization, including... ANS - Sole proprietorships, LLCs,
corporations and partnerships
questions with correct answers.
What is the corporate tax rate in the US for 2018? ANS - A flat tax of 21%
Prior to 2018, what was the setup of the corporate tax rate? ANS - Eight tax brackets with progressive
marginal tax rate ranging from 15-39%
What is the tax rate for a personal service corporation? ANS - Flat tax of 31%
A personal service corporarion is... ANS - Substantially employee-owned and engages in one of the
following activities:
1) Health,
2) Law,
3) Engineering,
4) Architecture,
5) Accounting,
6) Actuarial Science,
7) Performing arts,
8) Consulting
If a corporation incurs a net capital gain, what is the tax treatment? ANS - It is treated as ordinary
income and taxed at 21%
What is the purpose of an Net Operating Loss (NOLs)? ANS - Carry forward them to offset future taxable
income
NOLs generated after Dec. 31, 2017 is... ANS - Limited to 80% of the current year's taxable income
, NOLs generated before Jan 1, 2018 can be used... ANS - 100%
Carryforward and carryback rules for NOLS generated after Dec. 31, 2017... ANS - Carryback provisions
are repealed and NOLs can be carried forward indefinitely
Prior to 2018 carryback and carryforward ANS - Carryback 2 years and carryforward 20 years
Do the old NOL rules still apply? ANS - Yes, on NOLs generated prior to Jan 1, 2018
What are the "special deductions" that corporations are allowed to take? ANS - 1) Dividends received
deduction,
2) The deduction for organizational expenditures and start-up costs
What deduction is limited to corporations? ANS - Charitable Contributions
Why does the dividends received deduction exist? ANS - To avoid triple taxation
Dividends received deduction is allowed based upon... ANS - Ownership
The dividends received deduction is limited to... ANS - The applicable deduction percentage X the
corporation's taxable income (calculated before dividends received deduction, NOL deduction, and
capital loss carrybacks)
What makes a corporation ineligible for the dividend received deduction? ANS - If the receiving
corporation has a net operating loss after reducing taxable income by the dividends received dedcution
Organizational expenditures pertain to... ANS - LLCs, corporations and partnerships
Start up costs can be incurred by any organization, including... ANS - Sole proprietorships, LLCs,
corporations and partnerships
