Exam 10: Taxation of Corporations

Soho is a personal service corporation that has $1,200,000 of gross revenue and $1,021,000 of deductible expenses? What is its income tax liability for 2018?

The local garden club, an exempt organization, had gross unrelated business income during the year of $14,000. Its costs associated with this income were $8,900. What is its unrelated business income tax in 2018?

Why is preferred stock so named?

Monroe Corporation reported the following results for the current year: Included in the above is $5,000 of qualified production activities income. In addition, Monroe Corporation has a $5,000 NOL carryforward from last year. How much can Monroe Corporation take as a charitable contribution deduction in the current year?

The Schedule L of Form 1120 is a corporate balance sheet as determined by the tax laws.

What are two penalty taxes that apply to corporations and what is the penalty tax rate?

Walker Corporation issues one right to purchase one share of preferred stock at $90 for each ten shares of common stock owned by a shareholder. Seth owns 200 shares of common stock and receives 20 rights. The rights can be exercised anytime during the next 6 months. On the date of issuance of the stock rights, the common stock is selling for $14 per share and the rights are selling for $10 each. Seth has a total basis in the 200 common shares of $600 and elects to allocate basis to the rights. If Seth sells the 20 rights for $600 five months after they are received, what is his realized gain?

Corporation A owns 50 percent of the voting stock of Corporation B. What is the minimum amount of stock that Corporation A must acquire in Corporation B to allow the two corporations to file a consolidated return.

Tom owns 60 percent of CDF Corporation. CDF rents a building from Tom for $4,500 per month. Fair rental value for the building is only $3,000 per month. In addition, CDF employs Tom's son as the general manager at a salary of $350,000 annually. Similar positions in similar businesses pay $200,000 annually. How much rental and dividend income should Tom report on his tax return for the year?

A large corporation had a net long-term capital loss in 2018 and net operating loss in 2018. What are the earliest year(s) to which these losses can be carried?

For 2017, the corporate alternative minimum tax was paid in addition to the regular corporate income tax.

The GGH Corporation, a calendar-year, accrual-basis corporation, has $400,000 of gross receipts and $320,000 of expenses from its service business. In addition, it has $5,000 of tax-exempt interest income, $20,000 of dividends from an affiliated corporation, a $10,000 short-term capital loss, and authorized a charitable contribution of $15,000 on December 15, which it paid on March 31 of the next tax year. What is GGH's taxable income and income tax liability for the current tax year?

Which of the following is an indication of the accumulation of earnings and profits beyond the reasonable needs of the business?

Solvay Corporation owns 15 percent of Wooster Corporation. Wooster pays Solvay a $20,000 dividend. Wooster's taxable income, including the dividend but before the dividend received deduction, is $18,000. What is Solvay's income tax liability?

Christopher and Ashley, brother and sister, each own 50 percent (1,000 shares) of the stock of Walcott Corporation. This year, Walcott redeems 400 of Christopher's shares in a qualifying redemption in exchange for land valued at $300,000 (basis $175,000). The corporation's E&P prior to the redemption was $350,000. Walcott's tax rate is 21 percent. What is Walcott's E&P after the redemption?

Vista Corporation, which has current earnings and profits (CE&P) of $10,000 and accumulated earnings and profits (AE&P) of $30,000, makes a $43,000 distribution to its sole shareholder, Julie, at the end of the current year. Julie has a basis in her Vista stock of $2,000. What is the amount of taxable income Julie must report from the Vista distribution?

What is JJ Corporation's balance in accumulated earnings and profits at the beginning of year 2 if in year 1 it made a $40,000 distribution to its shareholders, its current earnings and profits was $35,000, and its accumulated earnings and profits was $25,000 at the beginning of year 1?

Continental Corporation has $1,000,000 in common stock and $1,000,000 in 7 percent 10-year bonds in its capital structure. How much does Continental save in taxes in current dollars over the 10 years the bonds are outstanding by having these bonds instead of an all-equity capital structure? Assume Continental has a 21 percent tax rate in all years.

In 2017, a corporation's deduction for qualified U.S. production activities was 9% of qualified production activities income up to a maximum of 50% of applicable wages paid during the year.

Molokai Corporation distributed a building valued at $45,000 (basis of $20,000) to its sole shareholder. What is the effect of this distribution on the corporation's taxable income?