Question 1

Identify which of the following statements is true.

Accepted Answer

A) A corporate capital loss can be carried back three years,and then can be carried forward five years. 
B) Corporate capital loss carrybacks can offset corporate ordinary income earned in previous years. 
C) At the election of a corporation,a net capital loss carryback can be forgone and carried forward only. 
D) All are false. 
A) A corporate capital loss can be carried back three years,and then can be carried forward five years. 
B) Corporate capital loss carrybacks can offset corporate ordinary income earned in previous years. 
C) At the election of a corporation,a net capital loss carryback can be forgone and carried forward only. 
D) All are false.

Question 2

Summer Corporation has the following capital gains and losses during the current year: $$\begin{array} {| l | r |} 
\hline \text { LTCG: } & \$ 25,000 \
\hline \text { LTCL: } & 15,000 \
\hline \text { STCG: } & 4,000 \
\hline \text { STCL: } & 8,000 \
\hline
\end{array}$$ The tax result to the corporation is

Accepted Answer

A) $6,000 NSTCG included in gross income. 
B) $6,000 NLTCG included in gross income. 
C) $10,000 NLTCG is included in gross income and $4,000 NSTCL is carried forward to the next year. 
D) $10,000 NLTCG receives long-term capital gain treatment and $4,000 NSTCL included as ordinary loss. 
A) $6,000 NSTCG included in gross income. 
B) $6,000 NLTCG included in gross income. 
C) $10,000 NLTCG is included in gross income and $4,000 NSTCL is carried forward to the next year. 
D) $10,000 NLTCG receives long-term capital gain treatment and $4,000 NSTCL included as ordinary loss.

Question 3

Dividends paid from E&P are taxable to shareholders and are,therefore,deductible by the corporation.

Accepted Answer

A) True 
 B)False

Question 4

A family-owned corporation with substantial investment income could be subject to both the accumulated earnings tax and the personal holding company tax.

Accepted Answer

A) True 
 B)False

Question 5

A corporation which makes a charitable contribution of property for the care of the needy gets a deduction equal to the adjusted basis of the property.

Accepted Answer

A) True 
 B)False

Question 6

Trestle Corp.received $100,000 of dividend income from minor holdings (less than 20%)in U.S.publicly traded corporations.Determine the allowable dividend-received deduction under the following assumptions of net income from operations:
a.Net income from operations is $600,000.
b.Net income from operations is ($10,000).
c.Net income from operations is ($150,000).

Accepted Answer

The answer of Trestle Corp.received $100,000 of dividend income from...

Question 7

Blue Corporation distributes land and building having a $70,000 adjusted basis and a $200,000 FMV to its sole shareholder,Marina.Blue has current and accumulated E&P exceeding $200,000.The property is subject to a $120,000 mortgage,which Marina assumes.What is the amount of the taxable dividend received by Marina?

Accepted Answer

A) $0 
B) $70,000 
C) $80,000 
D) $130,000 
A) $0 
B) $70,000 
C) $80,000 
D) $130,000

Question 8

Individuals Terry and Jim form TJ Corporation.Terry transfers cash of $930,000 in exchange for 50% of the stock of the TJ Corporation worth $900,000 and a $30,000 note.Jim transfers equipment with a $890,000 adjusted basis and a $930,000 FMV for 50% of the stock worth $900,000 and a note of the TJ Corporation valued at $30,000.The basis of the equipment to TJ Corporation is

Accepted Answer

A) $890,000. 
B) $920,000. 
C) $940,000. 
D) $960,000. 
A) $890,000. 
B) $920,000. 
C) $940,000. 
D) $960,000.

Question 9

In a parent-subsidiary controlled group,the common parent corporation must own more than 50% of the stock of at least one subsidiary corporation.

Accepted Answer

A) True 
 B)False

Question 10

Corporations that are members of a brother-sister affiliated group may file a consolidated return if the proper election is made.

Accepted Answer

A) True 
 B)False

Question 11

If a corporation reports both a NLTCG and a NSTCG after netting all capital gains and losses,both the NLTCG and the NSTCG are subject to tax at rates applicable to ordinary income.

Accepted Answer

A) True 
 B)False

Question 12

For corporations,NSTCLs and NLTCLs are treated as STCLs for purposes of the carryback and carryforward rules.

Accepted Answer

A) True 
 B)False

Question 13

Ten years ago Finn Corporation formed a new 100 percent owned subsidiary,Wing Corporation,with a $500,000 investment.Wing Corporation is completely liquidated this year,with all assets distributed to Finn Corporation.As of the liquidation date,Wing has a basis in its assets of $350,000,and the assets are valued at $550,000.What is the gain or loss recognized by Finn Corporation due to the liquidating distribution,and what is Finn Corporation's basis in the assets received from Wing Corporation?

Accepted Answer

A)  $$\begin{array} { | l | l | } 
\hline \text { Gain Recognized by Finn } & \text { Finn Corp's Basis in Distributed } \
\text { Corporation } & \text { Assets } \
\hline \$ 50,000 \text { recognized } & \$ 550,000 \text { basis } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Gain Recognized by Finn } & \text { Finn Corp's Basis in Distributed } \
\text { Corporation } & \text { Assets } \
\hline \$ 0 \text { recognized } & \$ 550,000 \text { basis } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Gain Recognized by Finn } & \text { Finn Corp's Basis in Distributed } \
\text { Corporation } & \text { Assets } \
\hline \$ 0 \text { recognized } & \$ 350,000 \text { basis } \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Gain Recognized by Finn } & \text { Finn Corp's Basis in Distributed } \
\text { Corporation } & \text { Assets } \
\hline \$ 0 \text { recognized } & \$ 500,000 \text { basis } \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | l | } 
\hline \text { Gain Recognized by Finn } & \text { Finn Corp's Basis in Distributed } \
\text { Corporation } & \text { Assets } \
\hline \$ 50,000 \text { recognized } & \$ 550,000 \text { basis } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Gain Recognized by Finn } & \text { Finn Corp's Basis in Distributed } \
\text { Corporation } & \text { Assets } \
\hline \$ 0 \text { recognized } & \$ 550,000 \text { basis } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Gain Recognized by Finn } & \text { Finn Corp's Basis in Distributed } \
\text { Corporation } & \text { Assets } \
\hline \$ 0 \text { recognized } & \$ 350,000 \text { basis } \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Gain Recognized by Finn } & \text { Finn Corp's Basis in Distributed } \
\text { Corporation } & \text { Assets } \
\hline \$ 0 \text { recognized } & \$ 500,000 \text { basis } \
\hline
\end{array}$$

Question 14

John transfers assets with a $200,000 FMV (basis $160,000)and $170,000 of business-related liabilities to a corporation in exchange for 100% of the corporation's stock with a FMV of $130,000.The corporation assumes the $170,000 mortgage.The transfer qualifies under Sec.351.What is the corporation's basis in the property?

Accepted Answer

A) $160,000 
B) $170,000 
C) $190,000 
D) $200,000 
A) $160,000 
B) $170,000 
C) $190,000 
D) $200,000

Question 15

A corporation generates a net operating loss in 2019.Which of the following statements is correct regarding the corporation's ability to deduct the NOL?

Accepted Answer

A) The NOL can be carried back two years and carried forward 20 years,with any excess NOL lost. 
B) The NOL can be carried back three years and carried forward five years,with any excess NOL lost. 
C) The NOL can be carried forward five years,with any excess NOL lost. 
D) The NOL can only be carried forward,but the carryover period is unlimited. 
A) The NOL can be carried back two years and carried forward 20 years,with any excess NOL lost. 
B) The NOL can be carried back three years and carried forward five years,with any excess NOL lost. 
C) The NOL can be carried forward five years,with any excess NOL lost. 
D) The NOL can only be carried forward,but the carryover period is unlimited.

Question 16

For purposes of the accumulated earnings tax,reasonable needs of the business include all of the following with the exception of

Accepted Answer

A) making loans to stockholders. 
B) providing working capital for the business. 
C) acquiring the assets or stock of another business. 
D) reasonably anticipated expansion of the business and plant replacement. 
A) making loans to stockholders. 
B) providing working capital for the business. 
C) acquiring the assets or stock of another business. 
D) reasonably anticipated expansion of the business and plant replacement.

Question 17

The purpose of the accumulated earnings tax is to discourage corporations from retaining excessive amounts of earnings if the funds are invested in assets unrelated to the business needs.

Accepted Answer

A) True 
 B)False

Question 18

Jenkins Corporation has the following income and expense items during the current year: $$\begin{array} { | l | r | } 
\hline \text { Net loss from operations (before dividend income) } & ( \$ 25,000 ) \
\hline \text { Dividends from } 25 \% \text { owned corporations } & 150,000\\hline
\end{array}$$ The allowed dividends-received deduction is

Accepted Answer

A) $81,250. 
B) $97,500. 
C) $125,000. 
D) $150,000. 
A) $81,250. 
B) $97,500. 
C) $125,000. 
D) $150,000.

Question 19

A corporation is owned 70% by Jones and 30% by Smith.Jones owns 70 shares with a cost of $100 each.Smith owns 30 shares with a cost of $100 per share.The company redeems 5 shares from Smith at a redemption price of $400 per share.No stock is redeemed from Jones.This is not a redemption to pay death taxes,and it is not a partial liquidation.What is the tax impact on Smith?

Accepted Answer

A) $2,000 dividend 
B) $2,000 capital gain 
C) $1,500 dividend 
D) $1,500 capital gain 
A) $2,000 dividend 
B) $2,000 capital gain 
C) $1,500 dividend 
D) $1,500 capital gain

Question 20

A corporation generates a $200,000 net operating loss in 2018.In 2019 its taxable income from 2019 activities is $220,000.The corporation will be allowed an NOL deduction of

Accepted Answer

A) $220,000. 
B) $200,000. 
C) $176,000. 
D) $160,000. 
A) $220,000. 
B) $200,000. 
C) $176,000. 
D) $160,000.

Exam 32: Corporations

Identify which of the following statements is true.

Summer Corporation has the following capital gains and losses during the current year: LTCG: \ 25,000 LTCL: 15,000 STCG: 4,000 STCL: 8,000 The tax result to the corporation is

Dividends paid from E&P are taxable to shareholders and are,therefore,deductible by the corporation.

A family-owned corporation with substantial investment income could be subject to both the accumulated earnings tax and the personal holding company tax.

A corporation which makes a charitable contribution of property for the care of the needy gets a deduction equal to the adjusted basis of the property.

In a parent-subsidiary controlled group,the common parent corporation must own more than 50% of the stock of at least one subsidiary corporation.

Corporations that are members of a brother-sister affiliated group may file a consolidated return if the proper election is made.

If a corporation reports both a NLTCG and a NSTCG after netting all capital gains and losses,both the NLTCG and the NSTCG are subject to tax at rates applicable to ordinary income.

For corporations,NSTCLs and NLTCLs are treated as STCLs for purposes of the carryback and carryforward rules.

A corporation generates a net operating loss in 2019.Which of the following statements is correct regarding the corporation's ability to deduct the NOL?

For purposes of the accumulated earnings tax,reasonable needs of the business include all of the following with the exception of

The purpose of the accumulated earnings tax is to discourage corporations from retaining excessive amounts of earnings if the funds are invested in assets unrelated to the business needs.

Jenkins Corporation has the following income and expense items during the current year: Net loss from operations (before dividend income) (\ 25,000) Dividends from 25\% owned corporations 150,000 The allowed dividends-received deduction is

A corporation generates a $200,000 net operating loss in 2018.In 2019 its taxable income from 2019 activities is $220,000.The corporation will be allowed an NOL deduction of

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