CPA Exam : Federal Taxation of Entities

Study concepts, example questions & explanations for CPA Exam

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Example Questions

Example Question #1 : Federal Taxation Of Entities

If the Alpha Corporation's 2015 alternative minimum taxable income was . Which of the following properly identifies the exempt portion of the Alpha Corporation's 2015 alternative minimum taxable income? 

Possible Answers:

Correct answer:

Explanation:

This problem asks us to determine the exempt portion of the Alpha Corporation's alternative minimum taxable income (AMTI). A corporation is allowed an exemption of up to  in computing it AMTI; however, this exemption is reduced by twenty-five percent of the corporation's AMTI in excess of . We can write this by using the following equation:

Substitute and solve.

Example Question #2 : Federal Taxation Of Entities

For the current year, The Echo Company possessed the following income:

In the Echo Company's current year taxable income, how much should be included for dividends received? 

Possible Answers:

Cannot be determined 

Correct answer:

Explanation:

This problem is asking us to determine the amount of dividends to be included in the Echo Company's taxable income for the current year. The dividends were received from 20%-owned taxable domestic corporations; therefore, they are eligible for an 80% dividends received deduction. We can compute this value using the following formula:

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