Multiple choice

1) Identify which of the following statements is true.

A. A corporation that accrues compensation payable to an employee must pay the amount within two and one-half months after the close of the taxable year to deduct the amount in the year of the accrual. 

B. Accrued compensation that is deductible in the year of accrual is considered to be part of an IRS deferred compensation plan. 

C. Accrued compensation not paid within three and one-half months after the close of the corporation tax year is deducted in the year following the accrual. 

D. All are false. 

2) Island Corporation has the following income and expense items for the year. 

Gross receipts from sales $60,000 

Dividends received from 15%-owned domestic corporation 40,000 

Expenses connected with sales 30,000 

The taxable income of Island Corporation is

A. $70,000 

B. $100,000 

C. $42,000 

D. $47,000 

3) Which of the following items are adjustments made to arrive at alternative minimum taxable income?

A. Excess of depreciation claimed on personally acquired in the current year for taxable income purposes over that claimed for alternative minimum tax purposes 

B. Excess percentage depletion 

C. Statutory exemption 

D. Tax-exempt interest income earned on private activity bonds 

4) Boxer Corporation buys equipment in January of the current year with a 7-year class life for $15,000. The corporation expensed the $15,000 under Sec. 179. The deduction in the year of purchase for E&P purposes due to the acquisition and expensing of the equipment is

A. $3,000 

B. $14,000 

C. $15,000 

D. $1,500