Chapter 10 Questions Attached.

1) In 2011, Acme Corporation reports negative taxable income of $350,000, including a net operating loss (NOL) carryforward from 2010 of $70,000. What is Acme's NOL for 2011? 2) The Simplex Machine Corporation presents you with the following profit and loss statement of its operations for 2011 and requests that you prepare its tax return. Sales $570,000 Less: Cost of Goods Sold (480,000) Gross Profit $90,000 Less: Operating Expenses (110,000) ($20,000) Section 1231 Gain from Sale of Building 4,000 Taxable Income (Loss) ($16,000) Simplex Machine's taxable income for 2009 and 2010 was $9,000 and $33,000, respectively. a. Compute the NOL deduction, if any, for the Simplex Machine Corporation for 2011. b. What else should you do for your client once you apply the loss to the prior years' income? 3) A corporation generates a $72,000 NOL in 20X6. The corporation's modified taxable income for the following years is as follows. 20X1 $19,000 20X2 25,000 20X3 3,000 20X4 10,000 20X5 12,000 20X7 22,000 20X8 21,000 a. Compute the corporation's NOL carryover to 20X9 assuming that the corporation does not elect to forego the NOL carryback. b. Compute the corporation's NOL carryover to 20X9 assuming the corporation elects to forego the NOL carryback. 4) A retail hardware store was organized on January 1, 2011. Its taxable income in the first year is $300,000. It makes no distributions to its shareholders during that year or during the first 2.5 months of the second year. The only adjustments to taxable income for purposes of the accumulated earnings tax is for federal income taxes paid on its taxable income. a. Will the corporation be subject to the accumulated earnings tax for the first tax year? b. Assuming that the corporation has the same taxable income the second year and that it makes no distributions during the second year or the first 2.5 months of the third year, will it be subject to the accumulated earnings tax for the second year? c. If the corporation had distributed $115,000 to shareholders in its first year of existence and nothing in the second year, would it be subject to the accumulated earnings tax for the second year? 5) Jernigan Corporation, which uses the calendar year as its tax year, started business on December 1, 2009. Its gross receipts for 2009 totaled $500,000. Its gross receipts for 2010-2012 were $4,500,000, $4,900,000, and $6,000,000, respectively. Will the corporation be subject to AMT in 2012? Explain your answer. 6) For her 2011 tax year, Rosie Longo, who is unmarried, received $75,000 in wages (her only source of AGI for the year). During the year, she exercised an incentive stock option and purchased 100 shares of her company's stock (with a fair market value of $40 per share) for $10 per share. She took the standard deduction and personal exemption. What is her tentative minimum tax for the year? Does she owe any AMT