Exam 10: Taxation of Corporations

Fernando was a one-third shareholder in Rodriguez, Inc. prior to its liquidation in March. Fernando's basis in his Rodriguez stock was $50,000. In March, Rodriguez distributed property worth $125,000 (basis $80,000) in complete liquidation of Fernando's Rodriguez shares. Fernando took the property subject to a $30,000 liability. How much taxable gain must Fernando recognize upon receipt of the property from Rodriguez?

Intercompany dividends are one of many items eliminated in preparing a consolidated tax return.

The outstanding stock of Riccardo Corporation is owned as follows: Robert owns 50% of RMD, Inc. stock. The rest of RMD, Inc. stock is owned by unrelated parties. Riccardo Corporation redeems 90 of Robert's shares of stock for $9,000 in the only redemption transaction this year. Robert's basis for his stock is $10 per share (100 shares @ $10 = $1,000). Riccardo Corporation has $300,000 in E&P. How much capital gain or dividend income does Robert recognize as a result of this redemption?

Alpha Corporation's adjusted taxable income is $100,000 for 2017 and $200,000 for 2018. Alpha makes charitable contributions of $15,000 in 2017 and $19,000 in 2018. How much can Alpha carry forward for its charitable contributions in computing its 2019 taxable income?

A corporation has pre-tax book income of $324,000. In determining this income, the corporation included $2,000 of tax-exempt interest, $6,000 of dividends from an affiliated corporation, a capital loss of $50,000 and $3,000 of excess book depreciation. What is the corporation's taxable income?

A corporation must have positive earnings and profits in both its current earnings and profits account and its accumulated earnings and profits account to make a taxable dividend distribution.

Ponoco Corporation, which has current earnings and profits (CE&P) of $10,000 and accumulated earnings and profits (AE&P) of $30,000, makes a $41,000 distribution to its sole shareholder, Greg, at the end of the current year. Greg has a basis in his Ponoco stock of $2,000. What is the amount of taxable income Greg must report from the Ponoco distribution?

Soledad received one stock right for every two shares of stock she owned. She owned 100 shares that she purchased two years ago for $1,000. Each of the 50 rights that she received allows her to purchase one share of stock for $15. The stock is currently selling for $22 per share. What is her basis in the 50 stock rights?

An exempt organization has dividend income of $200,000. It receives contributions of $350,000 and grants totaling $175,000. Is this a private foundation?

Who is a disqualified person?

A corporation is subject to both the personal holding company tax and the accumulated earnings tax. Its regular taxable income is $200,000. Its adjusted taxable income for imposing the personal holding company tax is $170,000 and its taxable income for determining the accumulated earnings tax is $230,000. What is the corporation's total tax liability?

What is a corporate redemption?

What is the limit for corporate charitable contribution deductions?

What is JEB Corporation's taxable income and income tax if it has gross sales revenue of $3,000,000, cost of sales of $1,800,000, other expenses of $1,100,000, dividend income of $20,000 (10 percent ownership) and a charitable contribution of $25,000?

The accumulated earnings tax and the personal holding company tax can both apply to a corporation in place of the regular corporate income tax.

The outstanding stock of Riccardo Corporation is owned as follows: Robert owns 50% of RMD, Inc. stock. The rest of RMD, Inc. stock is owned by unrelated parties. Riccardo Corporation redeems 90 of Kyle's shares of stock for $9,000 in the only redemption transaction this year. Kyle's basis for his stock is $10 per share. Riccardo Corporation has $300,000 in E&P. How much capital gain or dividend income does Kyle recognize as a result of this redemption?

A controlled corporate group can consist of a parent and subsidiary or two corporations owned by the same individual.

For tax years after 2017, a new 21 percent excise tax is imposed on compensation in excess of paid to a covered employee by an exempt organization. A 1.4 percent excise tax applies to the net investment income of private colleges and university with at least 500 students and assets of at least per student beginning with the 2018 tax year.

M&E Corporation has two shareholders, Marco and Edward. M&E Corporation has current E&P of $50,000 and a deficit in accumulated E&P of $40,000. M&E Corporation is in the 25% marginal tax bracket. M&E Corporation distributes investment land to these shareholders. The land distributed to Marco has a FMV of $30,000 and a basis to M&E Corporation of $24,000. The land distributed to Edward has a FMV of $30,000 and a basis to M&E Corporation of $26,000. Marco's basis for his stock is $2,000. Edward's basis for his stock is $1,000. How much gain, if any, does M&E Corporation recognize on the distribution of this land to its shareholders?

When is the unrelated business tax assessed on an exempt organization?