EXAM 4 True/False (5 points each)- Anseer on bubble sheet 1. Every taxable entity must use a calendar fiscal year 2 "Book income" is the financial statement income ). To quality as Section 1231 property, the property must be used in a taxpayers trade or business and must be held for more than one year 4 Incentive stock options are an AMT adjustment. 5. Personal property depreciated using straight-line depreciation is not subject to Section 1245 recapture. 6, Charitable contributions are limited to 600% of for corporations. 7. Capital gains are taxed as "capital" income for corporations. 8. Capital losses can only be offset by capital gains. 9 Federal income tax is tax deductible. 10. Section 197 covers the tax issues regarding intangible assets, like goodwill. I1. A taxpayers holding period is always measured from the day after the taxpayer acquires the property 12. The "dividends received" deduction is to offset "triple-taxation 13. Section 1245 recapture does not apply to depreciable real property 14. Both C and S corporations recognize gain on the distribution of appreciated property and recognize a loss when it distributes property that has declined in value. 15. The "dividends received" deduction cannot create a "net operating loss" 16. A corporation that owns 80 % of the stock in another corporation is not taxed on the dividends it receives from the other corporation. 17. Corporations can use capital losses to offset ordinary income. 18. Book income and taxable income are normally the same. 19. C corporations cannot use the cash method ofaccounting if their average annual taxable income for the three previous tax years exceed $5 million. 20, C Corporations must pay estimated tax payments if the previous year's income tax was $500 or more. 21. The differences between book income and taxable income are reconciled in Schedule M-1 22. Large corporations (assets-$10,000,000) must use a Schedule M-3 for the income differences. 23. C Corporations do not pay Alternative Minimum Tax. 24. Controlled groups must allocate tax attributes between them. 25. C Corporation must file Form 1120 to report their taxes by April 15. Multiple Choice (5 points each)-Answer on bubble sheet. 26. Differences between book and taxable income are caused by I. Differences in GGAP and Tax law III. Differences in accrual and cash method IV. Differences in the bookkeeper and CPA V. Difference in tax evasion methods I1. Differences in GAAP and Tax law VI. Differences in camel botox methodse I. and IV Combination not listed Il and V b. Il and II1. c. d Ill and vI e. 27. Differences between book and taxable income are: I. Favorable I1. Unfavorable III. Permanent IV. Temporary I and IV b. 1. and II. c. 1. Il and IV d. None of these. e. All of these. 28. The lookback period for purposes of computing non-recaptured Section 1231 losses is: d. 7 years 5 years. b. e. 3 years indefinite c. 10 years