Tax Corp Chapter 3

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  • 1/98 Questions

    _____ is only available to corporate taxpayers.

    • a.A Federally declared disaster loss
    • b.The deduction for charitable contributions
    • c.The dividends received deduction
    • d.The Section 179 deduction
    • e.All of these choices are correct.
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About This Quiz

Tax Corp Chapter 3 explores corporate tax scenarios including income types, deductions, and compensation limits. It assesses understanding of passive activity losses, executive compensation, capital gains reporting, and organizational expenditure deductions relevant for finance professionals.

Tax Corp Chapter 3 - Quiz

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  • 2. 

    Which of the following is considered a startup expenditure?

    • a.Printing of stock certificates

    • b.Depreciation of store equipment

    • c.Rent and payroll incurred before a corporation actually begins to produce any gross income

    • d.Accounting services incident to organization

    • e.Expenses of temporary directors meetings

    Correct Answer
    A. c.Rent and payroll incurred before a corporation actually begins to produce any gross income
    Explanation
    Startup expenditures include various investigation expenses involved in entering a new business (e.g., travel, market surveys, financial audits, and legal fees) and operating expenses such as rent and payroll that are incurred by a corporation before it actually begins to produce any gross income. "Expenses of temporary directors meetings" and "Accounting services incident to organization" are organizational expenditures, and "Printing of stock certificates" must be capitalized.

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  • 3. 

    During 2019, Savannah Corporation, a calendar year C corporation, had operating income of $730,000, operating expenses of $400,000, a short-term capital loss of $30,000, and a long-term capital gain of $90,000. What is Savannah's tax liability for 2019?

    • a.$81,900

    • b.$153,300

    • c.$44,100

    • d.$56,700

    • e.$165,900

    Correct Answer
    A. a.$81,900
    Explanation
    Savannah's taxable income is $390,000 [$730,000 operating income – $400,000 operating expenses + $60,000 net capital gain ($90,000 long-term capital gain – $30,000 short-term capital loss)]. Corporate income tax on taxable income of $390,000 is $81,900 ($390,000 × 21% flat tax rate). Corporations do not receive a preferential tax rate on long-term capital gains.

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  • 4. 

    What amount of accumulated earnings of a corporation is considered within the reasonable needs of a business without the corporation having to show a bona fide business reason for the accumulation?

    • a.$250,000 or less

    • b.$300,000 or less

    • c.$150,000 or less

    • d.$200,000 or less

    • e.$400,000 or less

    Correct Answer
    A. a.$250,000 or less
    Explanation
    Most businesses are allowed a $250,000 minimum credit. As a result, most corporations can accumulate $250,000 in earnings over a series of years without fear of an accumulated earnings tax.

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  • 5. 

    The personal holding company tax rate is 20%.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Correct. The personal holding company tax is imposed at the rate of 20% and is designed to force a corporation to distribute earnings to shareholders.

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  • 6. 

    Dalmatian Corporation acquired intellectual property in 2019 and expensed amortization of $101,000 on its financial statements, which were prepared according to GAAP. For Federal income tax purposes, Dalmatian deducted $131,000. How much tax return amortization would Dalmatian Corporation report on Part III of Schedule M–3?

    • a.$20,000

    • b.$131,000

    • c.$0

    • d.$232,000

    • e.$101,000

    Correct Answer
    A. b.$131,000
    Explanation
    Correct. The corporation must report the amortization on line 28, Part III as follows: $101,000 book amortization in column (a), $20,000 temporary difference in column (b), and $131,000 tax return amortization in column (d).

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  • 7. 

    Toby owns 60% of the stock in an S corporation that earned $230,000 during the year. He also owned 10% of the stock in a C corporation that earned $100,000 during the year. Toby received no distributions from the C corporation. With respect to this information, Toby must report $138,000 of income on his individual income tax return for the year.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    An S corporation's income is passed through to the shareholders and must be reported on their personal tax returns. A C corporation's income is taxed to a shareholder only when distributed as dividends. Therefore, Toby will include $138,000 ($230,000 × 60%) of income from the S corporation on his return.

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  • 8. 

    The net income of a proprietorship is subject to the self-employment tax, as are some partnership allocations of income to partners.  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The explanation for the correct answer is that the net income of a proprietorship is indeed subject to the self-employment tax. This is because a proprietorship is a business owned and operated by one individual, and the individual is considered self-employed. Therefore, the net income of the proprietorship is subject to the self-employment tax. Additionally, some partnership allocations of income to partners may also be subject to the self-employment tax, depending on the specific circumstances and agreements within the partnership.

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  • 9. 

    No entity-level Federal income tax is typically assessed on S corporations, limited liability companies (LLCs), or partnerships.  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    S corporations, limited liability companies (LLCs), and partnerships are all pass-through entities, meaning that the income generated by these entities is passed through to the owners and taxed at their individual tax rates. Therefore, there is no entity-level federal income tax assessed on these types of businesses.

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  • 10. 

    The Check-the-Box Regulations allow an entity with more than one owner to elect to be classified as either a partnership or a corporation.  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The Check-the-Box Regulations give entities with multiple owners the flexibility to choose their classification as either a partnership or a corporation. This means that they can select the option that best suits their needs and goals. This regulation allows for greater flexibility in tax planning and structuring for businesses with multiple owners.

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  • 11. 

    The election under the Check-the-Box Regulations is not available to entities that are actually incorporated under state law or to entities that are required to be corporations under Federal law (e.g., certain publicly traded partnerships).  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The explanation for the given correct answer is that the election under the Check-the-Box Regulations is not available to entities that are actually incorporated under state law or to entities that are required to be corporations under Federal law. This means that if an entity is already incorporated under state law or is required to be a corporation under Federal law, it cannot make the election under the Check-the-Box Regulations. Therefore, the statement "The election under the Check-the-Box Regulations is not available to entities that are actually incorporated under state law or to entities that are required to be corporations under Federal law" is true.

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  • 12. 

    As a result of the TCJA of 2017, high-income individuals might consider the corporate entity form as a means to reduce their tax burden.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    With the enactment of the corporate 21% flat tax rate, corporate rates are lower than the tax rates for high-income individual taxpayers. As a result, high-income individuals might consider the corporate entity form as a means to reduce their tax burdens.

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  • 13. 

    On December 31, 2019, Topaz, Inc., an accrual basis C corporation, accrues a $90,000 bonus to Barry, its vice president and a 70% shareholder. Topaz pays the bonus to Barry, who is a cash basis taxpayer, on March 15, 2020. Topaz deducts the bonus in 2020, the year in which it is included in Barry's gross income.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Correct. Because Barry is a related party (more than 50% shareholder), Topaz's deduction for the bonus occurs in 2020, the year in which the $90,000 is included in Barry's gross income.

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  • 14. 

    Gully, a C corporation, had $115,000 net income from operations, a short-term capital gain of $15,000, and a $10,000 short-term capital loss in 2019. Gully Corporation's taxable income is $115,000.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    A corporation can reduce capital gains to the extent of capital losses. Therefore, Gully has a net short-term capital gain of $5,000 ($15,000 – $10,000). Its net income is $120,000 ($115,000 + $5,000).

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  • 15. 

    Dalmatian Corporation acquired intellectual property in 2019 and expensed amortization of $101,000 on its financial statements, which were prepared according to GAAP. For Federal income tax purposes, Dalmatian deducted $131,000. How much tax return amortization would Dalmatian Corporation report on Part III of Schedule M–3?

    • a.$232,000

    • b.$0

    • c.$131,000

    • d.$20,000

    • e.$101,000

    Correct Answer
    A. c.$131,000
    Explanation
    The corporation must report the amortization on line 28, Part III as follows: $101,000 book amortization in column (a), $20,000 temporary difference in column (b), and $131,000 tax return amortization in column (d).

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  • 16. 

    For a C corporation that has been in existence for three years, losses cannot be passed through to the shareholders.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Correct. One of the drawbacks to using the corporate form in conducting a trade or business is that losses in the early stage of the business cannot be passed through to the shareholders. The losses can only be used by the corporation when it has taxable income.

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  • 17. 

    Markson, the sole shareholder of Garnet Corporation, a C corporation, has the corporation pay him $100,000. For tax purposes, Markson would prefer to have the payment treated as salary instead of a dividend.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    Markson must include in gross income both salary and dividends, but he would prefer dividend income due to the preferential tax rate accorded such income.

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  • 18. 

    Corporate-source income maintains its identity as it passes through the corporation to the shareholders.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    Corporate-source income loses its identity as it passes through the corporation to its shareholders. Items that normally receive preferential tax treatment (e.g., interest on municipal bonds) are not taxed as such to the shareholders.

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  • 19. 

    Tax planning to reduce corporate income taxes should occur before the end of the tax year.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Correct. Tax planning to reduce corporate income taxes should occur before the end of the tax year. Effective planning can cause income to be shifted to the next tax year and can produce large deductions by incurring expenses before year-end. Particular attention should be paid to the timing of capital gains and losses, planning for the business interest expense limitation, and charitable contributions.

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  • 20. 

    The income of a C corporation is subject to double taxation.  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The income of a C corporation is subject to double taxation because the corporation is taxed on its profits at the corporate level, and then the shareholders are taxed again on any dividends or distributions they receive from the corporation. This is in contrast to other types of business entities, such as partnerships or S corporations, where the income is only taxed once at the individual level.

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  • 21. 

    A corporation must make payments of estimated tax unless its tax liability can reasonably be expected to be less than $500.  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    A corporation must make payments of estimated tax unless its tax liability can reasonably be expected to be less than $500. This means that if a corporation's tax liability is expected to be $500 or more, it is required to make estimated tax payments. Therefore, the statement is true.

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  • 22. 

    Corporate taxpayers with total assets of $10 million or more are required to report much greater detail relative to differences between income (loss) reported for financial purposes and income (loss) reported for tax purposes.  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Corporate taxpayers with total assets of $10 million or more are required to report much greater detail relative to differences between income (loss) reported for financial purposes and income (loss) reported for tax purposes. This means that the statement is true.

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  • 23. 

    For a net operating loss arising in 2019, the NOL can be carried back two years and forward 20 years.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    For NOLs arising after 2017, the NOL can be carried forward indefinitely to offset taxable income in those future years. NOLs arising after 2017 cannot be carried back.

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  • 24. 

    Pyrite Corporation, an accrual basis taxpayer, was formed and began operations on February 1, 2019. During its first year of operations (February 1–December 31, 2019), Pyrite incurred the following expenses: fee paid to state of incorporation of $2,000, accounting and legal services incident to organization of $9,000, and expenses related to the printing and sale of stock certificates of $10,000. Pyrite has $11,000 of qualified organizational expenditures that it may elect to amortize.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Expenditures incurred in connection with issuing and selling shares of stock or other securities do not qualify as organizational expenditures. Thus, Pyrite's organizational expenditures total $11,000 ($2,000 incorporation fee + $9,000 accounting and legal fees).

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  • 25. 

    Tundra Corporation, a calendar year C corporation, was formed and began operations on July 1, 2019. The following expenses were incurred during the first tax year (July 1 through December 31, 2019) of operations:   Expenses of temporary directors and of organizational meetings $9,000 Fee paid to the state of incorporation 1,000 Accounting services incident to organization 2,500 Legal services for drafting the corporate charter and bylaws 3,500 Expenses incident to the printing and sale of stock certificates 4,000 Assuming a § 248 election, what is Tundra's deduction for organizational expenditures for 2019?

    • a.$533

    • b.$5,367

    • c.$5,500

    • d.$0

    • e.$5,000

    Correct Answer
    A. b.$5,367
    Explanation
    Qualifying organizational expenditures include these items:

    Expenses of temporary directors and of organizational meetings $ 9,000
    Fee paid to the state of incorporation 1,000
    Accounting services incident to organization 2,500
    Legal services for drafting the corporate charter and bylaws 3,500
    Expenses incident to the printing and sale of stock certificates 4,000

    Tundra Corporation’s deduction under § 248 for 2019 is determined as follows:

    Immediate expensing $5,000
    Amortization [($16,000 – $5,000) ÷ 180] × 6 (months in tax year) = 367
    Total

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  • 26. 

    What is the effect of a corporation's method of accounting on the corporation's use of the organizational expenditures deduction under § 248?

    • a.The deduction tends to yield better tax results when the corporation uses the accrual method of accounting.

    • b.The deduction tends to yield better tax results when the corporation uses the cash method of accounting.

    • c.Using the deduction and the accrual method of accounting is generally counterproductive.

    • d.The corporation's method of accounting is of no consequence.

    • e.Using the deduction and the cash method of accounting is generally counterproductive.

    Correct Answer
    A. d.The corporation's method of accounting is of no consequence.
    Explanation
    An expense incurred by a cash basis corporation in its first tax year qualifies even though it is not paid until a subsequent year.

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  • 27. 

    The purpose of the dividends received deduction is to mitigate multiple taxation of corporate income.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Correct. Without the deduction, dividend income paid to a corporation would be taxed to the recipient corporation, with no corresponding deduction to the distributing corporation. Later, when the recipient corporation distributed the income to its shareholders, the income would again be subject to taxation, with no corresponding deduction to the corporation.

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  • 28. 

    For 2019, a corporation is required to apply a minimum tax rate to an expanded base and pay an AMT equal to the difference between the tentative AMT and the regular tax.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The TCJA of 2017 repealed the corporate AMT for tax years beginning after 2017.

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  • 29. 

    For 2019, the individual marginal tax rates range from 10% to 37%, while the corporate marginal tax rates range from 10% to 39.6%.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The tax rates for individuals are progressive, with the rates ranging from 10% to 37%. Corporations are taxed at a flat rate of 21%.

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  • 30. 

    To be considered a personal holding company (pHC), more than 50% of the stock must be owned by 10 or fewer individuals at any time during the last half of the year.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    A PHC has more than 50% of the value of the outstanding stock owned by five or fewer individuals at any time during the last half of the year.

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  • 31. 

    Like individuals, corporations are not allowed a deduction for interest paid or incurred on amounts borrowed to purchase or carry tax-exempt securities.  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Corporations are not allowed to deduct the interest paid or incurred on amounts borrowed to purchase or carry tax-exempt securities. This is because tax-exempt securities are already exempt from taxation, so allowing a deduction for the interest paid on the borrowed funds would result in a double tax benefit. Therefore, the statement is true.

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  • 32. 

    What is the effect of a corporation's method of accounting on the corporation's use of the organizational expenditures deduction under § 248?

    • a.The corporation's method of accounting is of no consequence.

    • b.Using the deduction and the cash method of accounting is generally counterproductive.

    • c.The deduction tends to yield better tax results when the corporation uses the accrual method of accounting.

    • d.Using the deduction and the accrual method of accounting is generally counterproductive.

    • e.The deduction tends to yield better tax results when the corporation uses the cash method of accounting.

    Correct Answer
    A. a.The corporation's method of accounting is of no consequence.
    Explanation
    An expense incurred by a cash basis corporation in its first tax year qualifies even though it is not paid until a subsequent year.

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  • 33. 

    Schedule M–3 is required of corporations with more than $10 million of total assets.  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Schedule M-3 is a tax form that is required to be filed by corporations with more than $10 million of total assets. This form provides a more detailed breakdown of the corporation's financial information, including balance sheet and income statement items. Therefore, the statement "Schedule M-3 is required of corporations with more than $10 million of total assets" is true.

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  • 34. 

    Indicate whether the following items would be "Added" to or "Deducted" from the net income per books on Schedule M-1 to arrive at the income per the tax return. Federal income tax per books.  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The correct answer is "True." The federal income tax per books would be "Added" to the net income per books on Schedule M-1 to arrive at the income per the tax return.

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  • 35. 

    Indicate whether the following items would be "Added" to or "Deducted" from the net income per books on Schedule M-1 to arrive at the income per the tax return. Excess of capital losses over capital gains.  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The excess of capital losses over capital gains would be "Added" to the net income per books on Schedule M-1 to arrive at the income per the tax return. This is because capital losses can be used to offset capital gains, reducing the taxable income. Therefore, the excess of capital losses would need to be accounted for in order to accurately calculate the income per the tax return.

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  • 36. 

    The AMT rules are the same for individuals and corporations.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    After the TCJA of 2017, corporations are no longer subject to the AMT. Although fewer individuals will be subject to the AMT under the TCJA of 2017, the TCJA of 2017 did not repeal the AMT for individuals.

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  • 37. 

    The due date (not including extensions) for filing a 2019 Federal income tax return for a calendar year C corporation (Form 1120) is March 15, 2020.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The due date for filing a Form 1120 is the fifteenth day of the fourth month following the end of the corporation's tax year. Thus, a 2019 Form 1120 for a calendar year C corporation would be due April 15, 2020.

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  • 38. 

    Any corporation that files Schedule M–3 must also file Schedule M–1.  

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The statement is false because not all corporations that file Schedule M-3 are required to file Schedule M-1. Schedule M-3 is used for reporting book-tax differences for corporations with assets of $10 million or more, while Schedule M-1 is used for reporting adjustments to book income to arrive at taxable income. Therefore, only corporations that meet the asset threshold and have book-tax differences are required to file both schedules.

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  • 39. 

    One objective of Schedule M–3 is to create greater transparency between corporate financial statements and tax returns.  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Schedule M-3 is a form that certain corporations are required to file with their tax returns. It aims to reconcile the differences between the financial statement income and the taxable income reported on the tax return. By doing so, Schedule M-3 increases transparency by providing a clearer picture of how a corporation's financial statements align with its tax returns. Therefore, the statement that one objective of Schedule M-3 is to create greater transparency between corporate financial statements and tax returns is true.

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  • 40. 

    A corporation must make estimated tax payments unless its tax liability can reasonably be expected to be less than $1,000.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    A corporation must make estimated tax payments unless its tax liability can reasonably be expected to be less than $500. A corporation that fails to pay its required estimated payments can be assessed a nondeductible penalty.

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  • 41. 

    Creek Corporation had $210,000 of active income, $45,000 of portfolio income, and a $230,000 passive activity loss during the year. If Creek is a closely held C corporation that is not a personal service corporation (PSC), it can deduct $230,000 of the passive activity loss in the year.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    If Creek is a closely held corporation, the passive activity loss is deductible to the extent of the corporation's active income, or $210,000.

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  • 42. 

    Oliver is the sole shareholder of a C corporation, and Lonnie owns a sole proprietorship. Both businesses were started in 2019, and each business has a long-term capital gain of $20,000 for the year. Neither business made any distributions during the year. With respect to this information, which of the following statements is false?

    • a.Oliver must report a $20,000 long-term capital gain on his 2019 tax return.

    • b.Oliver's corporation pays a tax of $4,200 on the capital gain.

    • c.Oliver's corporation does not receive a preferential tax rate on the $20,000 long-term capital gain.

    • d.Lonnie receives a preferential tax rate on a long-term capital gain of $20,000.

    • e.Lonnie must report a $20,000 long-term capital gain on his 2019 tax return.

    Correct Answer
    A. a.Oliver must report a $20,000 long-term capital gain on his 2019 tax return.
    Explanation
    Correct. A C corporation is a separate taxpaying entity, and income of a C corporation is not taxed to shareholders until distributed as dividends. A C corporation does not receive preferential tax rate treatment on LTCG ("Oliver's corporation does not receive a preferential tax rate on the $20,000 long-term capital gain" and "Oliver's corporation pays a tax of $4,200 on the capital gain"). Income of a sole proprietorship is taxed currently on the tax return of the proprietor, and the LTCG of the entity is reported as such by the proprietor ("Lonnie must report a $20,000 long-term capital gain on his 2019 tax return"), with the preferential tax rate applicable ("Lonnie receives a preferential tax rate on a long-term capital gain of $20,000").

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  • 43. 

    Ruby Corporation, a calendar year, accrual method C corporation, has two cash method, calendar year shareholders who are unrelated to each other. Cole owns 55% of the stock, and Martin owns the remaining 45%. During 2019, Ruby paid a salary of $200,000 to each shareholder. On December 31, 2019, Ruby accrued a bonus of $50,000 to each shareholder. Assuming that the bonuses are paid to the shareholders on February 1, 2020, what is Ruby Corporation's 2019 deduction for the above amounts?

    • a.$450,000

    • b.$250,000

    • c.$0

    • d.$500,000

    • e.$400,000

    Correct Answer
    A. a.$450,000
    Explanation
    A corporation that uses the accrual method cannot claim a deduction for an accrual with respect to a related party until the recipient reports that amount as income. Thus, Ruby cannot deduct the $50,000 bonus attributable to Cole, a related party (i.e., more than 50% shareholder), until 2020. Ruby can deduct in 2019 the salary payments made to each shareholder plus the accrued bonus to Martin, or $450,000 ($200,000 salary + $200,000 salary + $50,000 bonus).

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  • 44. 

    Slope Corporation, which sustained a $5,000 net capital loss during the year, will enter $5,000 as an addition item on Schedule M–1.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Correct. The loss is an expense for book purposes but not deductible for tax purposes. Therefore, the $5,000 net capital loss must be added in reconciling from book income to taxable income.

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  • 45. 

    Which of the following is used to reconcile unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at year-end?

    • a.Schedule M–3

    • b.Schedule M–8

    • c.Schedule M–16

    • d.Schedule M–1

    • e.Schedule M–2

    Correct Answer
    A. e.Schedule M–2
    Explanation
    In general, this financial statement reconciliation is done by adding net income per books to the beginning balance of retained earnings and subtracting distributions made during the year. Other sources of increases or decreases in retained earnings are also listed on Schedule M–2.

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  • 46. 

    NOLs arising before 2017 and carried over to years after 2017 are subject to the 80% taxable income limitation.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The new 80% of taxable income limitation applies to NOLs arising after 2017. NOLs arising in earlier years and carried over to years after 2017 are not subject to the taxable income limitation.

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  • 47. 

    Summer Corporation had operating income of $100,000, a long-term capital loss of $6,000, and a long-term capital gain of $1,000. As a result of these transactions, Summer has no capital loss to carry back or carry forward.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    A corporation cannot deduct a net capital loss in the year incurred. For corporations, a net capital loss must be carried back three years or forward five years and be offset against capital gains in the carryback/forward years. Summer can use $1,000 of the long-term capital gain to offset the capital loss, leaving a $5,000 ($6,000 – $1,000) loss carryback.

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  • 48. 

    An unincorporated entity with only one owner is, by default, classified as a disregarded entity (or DRE).  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    An unincorporated entity with only one owner is classified as a disregarded entity (or DRE) by default. This means that for tax purposes, the entity is not separate from its owner and the owner reports the entity's income and expenses on their personal tax return. This classification is common for sole proprietorships and single-member limited liability companies (LLCs).

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  • 49. 

    Indicate whether the following items would be "Added" to or "Deducted" from the net income per books on Schedule M-1 to arrive at the income per the tax return. Life insurance proceeds received as a result of the death of a key employee.  

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The life insurance proceeds received as a result of the death of a key employee would be "Added" to the net income per books on Schedule M-1 to arrive at the income per the tax return.

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    ProProfs Editorial Team
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