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Taxation of Corporations

Description: This quiz covers various aspects of corporate taxation, including the basics of corporate taxation, computation of taxable income, tax rates, and various deductions and credits available to corporations.
Number of Questions: 14
Created by:
Tags: corporate taxation taxable income tax rates deductions credits
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What is the basic principle underlying the taxation of corporations?

  1. Corporations are taxed on their net income.

  2. Corporations are taxed on their gross income.

  3. Corporations are taxed on their retained earnings.

  4. Corporations are taxed on their dividends.

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Correct Option: A
Explanation:

The basic principle underlying the taxation of corporations is that they are taxed on their net income, which is their gross income minus allowable deductions and expenses.

What is the federal income tax rate for corporations?

  1. 15%

  2. 21%

  3. 26%

  4. 35%

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Correct Option: B
Explanation:

The federal income tax rate for corporations is 21%.

What are some of the deductions that corporations can claim on their tax returns?

  1. Cost of goods sold

  2. Salaries and wages

  3. Interest expense

  4. Depreciation and amortization

Show answer
Correct Option:
Explanation:

Corporations can claim a variety of deductions on their tax returns, including cost of goods sold, salaries and wages, interest expense, and depreciation and amortization.

What are some of the credits that corporations can claim on their tax returns?

  1. Foreign tax credit

  2. Research and development credit

  3. Work opportunity tax credit

  4. Low-income housing credit

Show answer
Correct Option:
Explanation:

Corporations can claim a variety of credits on their tax returns, including foreign tax credit, research and development credit, work opportunity tax credit, and low-income housing credit.

What is the difference between a C corporation and an S corporation?

  1. C corporations are taxed on their net income, while S corporations are not.

  2. C corporations can have multiple shareholders, while S corporations can only have a limited number of shareholders.

  3. C corporations can accumulate earnings, while S corporations cannot.

  4. C corporations are more complex to operate than S corporations.

Show answer
Correct Option:
Explanation:

C corporations are taxed on their net income, while S corporations are not. C corporations can have multiple shareholders, while S corporations can only have a limited number of shareholders. C corporations can accumulate earnings, while S corporations cannot. C corporations are more complex to operate than S corporations.

What is the accumulated earnings tax?

  1. A tax on corporations that accumulate earnings beyond a certain level.

  2. A tax on corporations that pay dividends to their shareholders.

  3. A tax on corporations that engage in certain types of business activities.

  4. A tax on corporations that have a large number of shareholders.

Show answer
Correct Option: A
Explanation:

The accumulated earnings tax is a tax on corporations that accumulate earnings beyond a certain level. The purpose of the tax is to prevent corporations from accumulating earnings to avoid paying dividends to their shareholders.

What is the personal holding company tax?

  1. A tax on corporations that are closely held and have a large amount of passive income.

  2. A tax on corporations that have a large number of shareholders.

  3. A tax on corporations that engage in certain types of business activities.

  4. A tax on corporations that have a large amount of debt.

Show answer
Correct Option: A
Explanation:

The personal holding company tax is a tax on corporations that are closely held and have a large amount of passive income. The purpose of the tax is to prevent individuals from using corporations to avoid paying personal income tax on their passive income.

What is the alternative minimum tax?

  1. A tax on corporations that have a large amount of tax preferences.

  2. A tax on corporations that have a large amount of passive income.

  3. A tax on corporations that engage in certain types of business activities.

  4. A tax on corporations that have a large number of shareholders.

Show answer
Correct Option: A
Explanation:

The alternative minimum tax is a tax on corporations that have a large amount of tax preferences. The purpose of the tax is to ensure that corporations pay a minimum amount of tax, even if they are able to reduce their regular tax liability through the use of tax preferences.

What is the net investment income tax?

  1. A tax on corporations that have a large amount of net investment income.

  2. A tax on corporations that have a large amount of passive income.

  3. A tax on corporations that engage in certain types of business activities.

  4. A tax on corporations that have a large number of shareholders.

Show answer
Correct Option: A
Explanation:

The net investment income tax is a tax on corporations that have a large amount of net investment income. The purpose of the tax is to ensure that corporations pay a minimum amount of tax on their investment income.

What is the global intangible low-taxed income tax?

  1. A tax on corporations that have a large amount of intangible income that is taxed at a low rate.

  2. A tax on corporations that have a large amount of passive income.

  3. A tax on corporations that engage in certain types of business activities.

  4. A tax on corporations that have a large number of shareholders.

Show answer
Correct Option: A
Explanation:

The global intangible low-taxed income tax is a tax on corporations that have a large amount of intangible income that is taxed at a low rate. The purpose of the tax is to prevent corporations from shifting their intangible income to low-tax jurisdictions.

What is the foreign tax credit?

  1. A credit that corporations can claim for taxes paid to foreign governments.

  2. A credit that corporations can claim for taxes paid to state and local governments.

  3. A credit that corporations can claim for taxes paid on dividends received from other corporations.

  4. A credit that corporations can claim for taxes paid on interest received from other corporations.

Show answer
Correct Option: A
Explanation:

The foreign tax credit is a credit that corporations can claim for taxes paid to foreign governments. The purpose of the credit is to prevent corporations from paying double tax on their foreign income.

What is the research and development credit?

  1. A credit that corporations can claim for expenses incurred in conducting research and development activities.

  2. A credit that corporations can claim for expenses incurred in hiring new employees.

  3. A credit that corporations can claim for expenses incurred in purchasing new equipment.

  4. A credit that corporations can claim for expenses incurred in advertising their products or services.

Show answer
Correct Option: A
Explanation:

The research and development credit is a credit that corporations can claim for expenses incurred in conducting research and development activities. The purpose of the credit is to encourage corporations to invest in research and development.

What is the work opportunity tax credit?

  1. A credit that corporations can claim for wages paid to employees from certain targeted groups.

  2. A credit that corporations can claim for wages paid to employees with disabilities.

  3. A credit that corporations can claim for wages paid to employees who are veterans.

  4. A credit that corporations can claim for wages paid to employees who are over the age of 55.

Show answer
Correct Option: A
Explanation:

The work opportunity tax credit is a credit that corporations can claim for wages paid to employees from certain targeted groups, such as veterans, ex-felons, and individuals who have been receiving welfare benefits.

What is the low-income housing credit?

  1. A credit that corporations can claim for investments in low-income housing.

  2. A credit that corporations can claim for investments in affordable housing.

  3. A credit that corporations can claim for investments in historic preservation.

  4. A credit that corporations can claim for investments in renewable energy.

Show answer
Correct Option: A
Explanation:

The low-income housing credit is a credit that corporations can claim for investments in low-income housing. The purpose of the credit is to encourage corporations to invest in affordable housing.

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