Principles Of Taxation For Business And Investment Planning 16th Edition By Jones – Test Bank

Chapter 11 The Corporate Taxpayer Answer Key

True / False Questions

1. In terms of dispersal of ownership, corporations are classified as either closely held or publicly held.
TRUE

Difficulty: 1 Easy
Learning Objective: 11-01 Identify the four primary legal characteristics of corporations.

2. The corporate characteristic of limited liability is more important to the shareholders than the characteristic of centralized management.
TRUE

Difficulty: 1 Easy
Learning Objective: 11-01 Identify the four primary legal characteristics of corporations.

3. The stock of closely held corporations is typically restricted as to transferability by some type of buy-sell agreement.
TRUE

Difficulty: 2 Medium
Learning Objective: 11-01 Identify the four primary legal characteristics of corporations.

4. The federal tax law considers the member corporations of an affiliated group to be a single entity for federal tax purposes. An example of this treatment is the requirement to share the 15% tax bracket.
TRUE

Difficulty: 2 Medium
Learning Objective: 11-01 Identify the four primary legal characteristics of corporations.

5. At least three corporations are required to form an affiliated group.
FALSE

Difficulty: 1 Easy
Learning Objective: 11-01 Identify the four primary legal characteristics of corporations.

6. An affiliated group consists of a parent company that directly owns 80% of at least one subsidiary corporation plus all other subsidiaries that are 80% owned within the group.
TRUE

Difficulty: 2 Medium
Learning Objective: 11-01 Identify the four primary legal characteristics of corporations.

7. The corporate characteristic of free transferability exists if the corporate stock is subject to a buy-sell agreement.
FALSE

Difficulty: 1 Easy
Learning Objective: 11-01 Identify the four primary legal characteristics of corporations.

8. A nonprofit corporation may incur a federal income tax if it has unrelated business income.
TRUE

Difficulty: 2 Medium
Learning Objective: 11-01 Identify the four primary legal characteristics of corporations.

9. Eagle, Inc. made a contribution to the Boy Scouts of $25,000 during its current tax year. The corporation’s taxable income before any charitable contribution deduction was $200,000. The corporation has a current charitable contribution deduction of $25,000.
FALSE

Difficulty: 2 Medium
Learning Objective: 11-01 Identify the four primary legal characteristics of corporations.

10. Bisou Inc. made a $48,200 contribution to charity this year. Only $39,000 of the contribution was deductible. Bisou can carry the $9,200 nondeductible contribution back three years and forward five years.
FALSE