Exam 11: The Corporate Income Tax

Fran, George, and Helen form FGH Corporation. In exchange for 300 shares of stock of the corporation, Fran contributes property with a basis of $15,000, fair market value of $50,000 and subject to a liability of $20,000 which the corporation assumed. George contributes property with a basis of $20,000, fair market value of $30,000 in exchange for 250 shares of stock of the corporation with a value of $25,000 plus $5,000 cash. Helen performs services for the corporation and receives $2,000 worth of stock (20 shares) in exchange for the services. a.What is the amount of Fran's recognized gain or loss on the transaction? b.What is Fran's basis in the stock of the corporation? c.What is the corporation's basis in the property received from Fran? d.What is the amount of George's recognized gain or loss on the transaction? e.What is George's basis in the stock of the corporation?

The corporate tax rates favor large corporations.

For the current year, the Beech Corporation has net income on its books of $60,000, including the following items: Federal tax depreciation exceeds the depreciation deducted on the books by $5,000. What is the corporation's taxable income?

In the current year, Parvifolia, Inc. had $400,000 of revenue from operations and $160,000 of dividends from non-affiliated 15 percent-owned domestic corporations. The corporation's deductible operating expenses totaled $410,000. What is Parvifolia, Inc.'s dividends received deduction for the current year?

Terry forms the Camphor Corporation during 2015. She transfers property with a value of $700,000 to Camphor Corporation in exchange for 100 percent of the stock in the corporation. Terry's basis in the property transferred was $400,000 and the corporation assumed a $275,000 mortgage on the property. If the fair market value of the stock received by Terry is $450,000, what is the corporation's basis in the property received from Terry?

For 2015, what is the maximum tax rate for personal service corporations?

Which of the following items is not generally a schedule M-1 adjustment?

The Birch Corporation has regular taxable income of $85,000 and a regular tax liability of $17,150. The corporation also has $45,000 of tax preference items. Calculate Birch Corporation's alternative minimum tax liability. Assume that the Birch Corporation is not a "small corporation."

The F. Repens Corporation has taxable income of $250,000 for the current year, including dividends of $60,000 received from 30 percent-owned domestic corporations. How much is the F. Repens Corporation's dividends received deduction for the current year?

A corporation owning 80 percent or more of the stock of another corporation has a dividends received deduction of 100 percent.

The Lagerstroemia Corporation was formed on January 1, 2015. Calculate the Lagerstroemia Corporation's taxable income or loss for 2015 given the following information:

The accumulated earnings tax is designed to prevent shareholders from avoiding the individual income tax.

Corporations may deduct without limitation any amount of charitable contributions providing the amounts are paid to qualified organizations.

Rob, Bill, and Steve form Big Company. Rob performs $45,000 of services for his shares of the company. Bill transferred property with a basis of $5,000 for $75,000 of stock. Steve contributes cash of $100,000 for his shares. Which of the three must recognize income in the year of the formation?

During the current year, the Melaleuca Corporation received dividends from 50-percent-owned domestic corporations in the amount of $100,000. a.​ ​ Assuming that in addition to the dividend income the corporation has gross income from operations of $250,000 and deductible operating expenses of $210,000, calculate the amount of the corporation's dividends received deduction for the current year. b.​ ​ If, instead of $250,000 in gross income from operations, the corporation has $200,000 in gross income from operations and the same amount of dividends and expenses, calculate the amount of the corporation's dividends received deduction for the current year.

Corporations may be subject to the alternative minimum tax.

ABC Company owns 40 percent of JMT Company and 95 percent of DEM Company. JMT pays a $80,000 dividend to ABC and DEM pays a $40,000 dividend to ABC in the current year. Assuming that ABC has $1,000,000 of taxable income, calculate ABC's dividends received deduction for the current year.

Ashwood Corporation has been in business for 20 years. For the previous 3 years, Ashwood Corporation had annual gross receipts of $3.3 million, $4.2 million and $5.4 million, respectively. For alternative minimum tax purposes, is Ashwood Corporation a small corporation? Give your reasoning and/or the calculation that you based your answer on. Also, why does it matter if they are a small corporation?

The Heal Yourself Health Care Corporation, a service corporation, has accumulated earnings of $375,000 and the corporation can establish a reasonable need for $125,000. Calculate the amount of the accumulated earnings tax, if any, that will be imposed on the corporation.

If a corporation is unable to deduct a capital loss against capital gains for a particular tax year, it loses the tax benefit since the loss may not be carried to other tax years.