Concept explainers
Introduction: To operate a business, a taxpayer generally chooses between individual trading,
To choose: The false statement given about capital losses.
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Chapter 11 Solutions
Cengagenowv2 For Whittenburg/altus-buller/gill's Income Tax Fundamentals 2020, 1 Term Printed Access Card
- For current year, S Corporation had a net short-term loss of $20,000. Its operating income excluding the capital loss was $100,000.Ā What is the tax treatment of the $20,000 net capital loss?arrow_forward30. Which of the following statements is CORRECT in regard to compensation expense paid to non-shareholders for an accrual-basis corporation? O The corporation may not deduct an excess of $1 million per employee per tax year If the compensation amount is considered excessive, it may be reclassified as a dividend. O The corporation may deduct all amounts earned by the employees in the current taxable year as long as it is paid within two and one-half months after the taxable year-end. 31. Which one of the following statements describes the bad-debt deduction for a corporation? O The deduction allowed for a specific bad debt is equal to its fair market value Corporations are allowed a deduction for partial worthlessness of bad debts, but only to the extent the debt has been charged off. O if a receivable is not collected by a cash-method corporation, a bad-debt deduction is allowed. 32 Which one of the following statements concerning taxes reported on Form 1120 is CORRECT? O Federalā¦arrow_forward17. Recovery of bad debt written off by a taxpayer: 1) P20,000 from accounts written off in a year which had a net income of P200,000 before the write-off (write-dff for the year was P20,000) 2) P5,000 from accounts written off in a year which had a net loss before written off in a year, which had a net loss before write off of P36,000 (write-off for the year was P5,000). The income from the bad debt recovery is: a. PO b. P20,000 c. P25,000arrow_forward
- Which of the following statements is incorrect with respect to the treatment of a net operating loss arising in 2022? a.Unlike individuals, corporations do not adjust their NOLs for net capital losses or nonbusiness deductions. b.The deduction for any carryover year of the NOL is limited to 80% of taxable income (determined without regard to the NOL deduction). c.A corporation may claim a dividends received deduction in computing an NOL. d.An NOL is generally carried back 2 years and forward 20 years.arrow_forwardLoss is generally considered a tax relief and can be carried forward to the following trading year and offset against the profit for that year. A company operating in Country A with the following tax loss rules. i.Ā Ā Ā Ā There is no cap on the number of years for which losses may be carried forward. ii.Ā Ā There is no cap is applicable for the first five years of assessment next following the year of assessment in which the taxpayers started a trade, business, or profession. iii.Ā There is no cap available where a taxpayer (whether individual or company) whose gross turnover is below $10,000,000 per annum. iv.Ā Ā The deduction allowed for prior year losses (PYL) is 50 percent of the net income for the respective year. In 2022, ABC Limited, a company registered in Country A, had a trading profit of $3,000,000. The company started business in 1997 and its gross revenue was $15,000,000 for the tax year. Ā Prior year tax losses are $4,000,000. Itās loss relief for that year is. a. $1,500,000ā¦arrow_forwardLoss is generally considered a tax relief and can be carried forward to the following trading year and offset against the profit for that year. A company operating in Country A with the following tax loss rules. i.Ā Ā Ā Ā There is no cap on the number of years for which losses may be carried forward. ii.Ā Ā Ā Ā There is no cap applicable for the first five years of assessment following the year of assessment in which the taxpayers started a trade, business, or profession. iii.Ā Ā Ā There is no cap available where a taxpayer (whether individual or company) whose gross turnover is below $10,000,000 per annum. iv.Ā Ā Ā The deduction allowed for prior year losses (PYL) is 50 percent of the net income for the respective year. In 2022, LMP Limited, a company registered in Country A, had a trading profit of $5,000,000. The company started business in 2020 and its gross revenue was $9,000,000 for the tax year.Ā Prior year tax losses are $4,000,000. Itās loss relief for that year is? a. $3,000,000 b.ā¦arrow_forward
- Loss is generally considered a tax relief and can be carried forward to the following trading year and offset against the profit for that year. A company operating in Country A with the following tax loss rules. i. There is no cap on the number of years for which losses may be carried forward. ii. There is no cap applicable for the first five years of assessment following the year of assessment in which the taxpayers started a trade, business, or profession. iii. There is no cap available where a taxpayer (whether individual or company) whose gross turnover is below $10,000,000 per annum. iv. The deduction allowed for prior year losses (PYL) is 50 percent of the net income for the respective year. In 2022, LMP Limited, a company registered in Country A, had a trading profit of $5,000,000. The company started business in 2020 and its gross revenue was $9,000,000 for the tax year. Prior year tax losses are $4,000,000. It's loss relief for that year is? Š°. $2,500,000 b.$4,000,000ā¦arrow_forwardWhich of the following statements is false? Ā A.Ā A corporation must file a Federal income tax return even if it has no taxable income for the year. Ā B.Ā Dividend received deduction is calculated as the dividend received times deduction percentage. Ā C.Ā A corporation cannot deduct net capital losses against its operating income. Ā D.Ā A C corporation with taxable income of $100,000 in the current year will have a tax liability of $21,000. Ā E.Ā Schedule M-1 is used to reconcile net income as computed for financial accounting purposes with taxable income reported on the corporation's income tax return.arrow_forwardABC Inc. is subject to the limitation on business interest expense. During the tax year, ABC Inc. realized $75,000 of interest expense. ABC Inc. had no business interest income. The income from operations was $20,000. ABC Inc. has investment income of $20,000 and depreciation of $10,000. What amount of the business interest realized, if any, will be carried forward to the next tax year? Ā Ā $69,000 Ā Ā $6,000 Ā Ā $0 Ā Ā $75,000 Taxpayer is single and has taxable income of $50,000. What tax does taxpayer pay on this income? Round your answer to the nearest dollar.Ā Ā Ā $6,749 Ā Ā $8,916 Ā Ā $4,664 Ā Ā $11,000arrow_forward
- Loss is generally considered a tax relief and can be carried forward to the following trading year and offset against the profit for that year. A company operating in Country A with the following tax loss rules. i. There is no cap on the number of years for which losses may be carried forward. ii. There is no cap applicable for the first five years of assessment following the year of assessment in which the taxpayers started a trade, business, or profession iii. There is no cap available where a taxpayer (whether individual or company) whose gross turnover is below $10,000,000 per annum. iv. The deduction allowed for prior year losses (PYL) is 50 percent of the net income for the respective year. In 2022, XYZ Limited, a company registered in Country A, had a trading profit of $5,000,000. The company started business in 1997 and its gross revenue was $25,000,000 for the tax year. Prior year tax losses are $2,000,000. It's loss relief for that year is? a.$2,500,000 b.$1,000,000ā¦arrow_forwardGoose Corporation, a C corporation, incurs a net capital loss of $12,000 for 2020. It also has ordinary income of $10,000 in 2020. Goose had net capital gains of $2,500 in 2016 and $5,000 in 2019. If an amount is zero, enter "0". a. Ā Determine the amount, if any, of the net capital loss of $12,000 that is deductible in 2020.$ b. Ā Determine the amount, if any, of the net capital loss of $12,000 that is carried forward to 2021.$arrow_forward