Question 1

A corporation has the following capital gains and losses during the current year: $$\begin{array} { | l | r | } 
\hline \text { LTCG: } & \$ 15,000 \
\hline \text { LTCL: } & 21,000 \
\hline \text { STCG: } & 3,000 \
\hline \text { STCL: } & 8,000 \
\hline
\end{array}$$ The tax result to the corporation is

Accepted Answer

A) deduct $3,000 of the STCL currently; carry forward the remaining $2,000 STCL and $6,000 LTCL. 
B) deduct $5,000 STCL and $6,000 LTCL. 
C) deduct nothing currently; carry back the $5,000 STCL and $6,000 LTCL for three years and carry forward for 5 years,if necessary. 
D) deduct nothing currently; carry back the $11,000 STCL for three years and carry forward for 5 years,if necessary. 
A) deduct $3,000 of the STCL currently; carry forward the remaining $2,000 STCL and $6,000 LTCL. 
B) deduct $5,000 STCL and $6,000 LTCL. 
C) deduct nothing currently; carry back the $5,000 STCL and $6,000 LTCL for three years and carry forward for 5 years,if necessary. 
D) deduct nothing currently; carry back the $11,000 STCL for three years and carry forward for 5 years,if necessary.

Question 2

Jones Corporation,a U.S.C corporation,owns 25% of the stock of Bien Corporation,French corporation that earns all of its income in Europe.Jones Corporation earned $1 million of operating income this year.In addition,it received a $500,000 dividend from Bien Corporation.Jones Corporation will be allowed a dividends-received deduction of

Accepted Answer

A) $500,000. 
B) $0. 
C) $250,000. 
D) $325,000. 
A) $500,000. 
B) $0. 
C) $250,000. 
D) $325,000.

Question 3

A closely held corporation will generally prefer to pay higher salary and lower dividends to shareholders who are employed in the business.

Accepted Answer

A) True 
 B)False

Question 4

Total Corporation has earned $75,000 current E&P and has an accumulated E&P deficit from prior years of $25,000.The corporation pays a $100,000 distribution to shareholders.Shareholders of the corporation have a total stock basis of $40,000.The tax results of the distributions to the shareholders will be

Accepted Answer

A) dividend income of $75,000 and tax-free return of capital of $25,000. 
B) dividend income of $50,000,tax-free return of capital of $40,000 and capital gain of $10,000. 
C) dividend income of $100,000. 
D) dividend income of $60,000 and tax-free return of capital of $40,000. 
A) dividend income of $75,000 and tax-free return of capital of $25,000. 
B) dividend income of $50,000,tax-free return of capital of $40,000 and capital gain of $10,000. 
C) dividend income of $100,000. 
D) dividend income of $60,000 and tax-free return of capital of $40,000.

Question 5

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 20 shares from Jones at a redemption price of $400 per share.No stock is redeemed from Smith.This is not a redemption to pay death taxes,and it is not a partial liquidation.What is the tax impact on Jones?

Accepted Answer

A) capital gain of $6,000 
B) capital gain of $8,000 
C) dividend income of $6,000 
D) dividend income of $8,000 
A) capital gain of $6,000 
B) capital gain of $8,000 
C) dividend income of $6,000 
D) dividend income of $8,000

Question 6

Bartlett Corporation,a U.S.manufacturer,reports the following results in its financial accounting records:
 $$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ 1,900,000 \
\hline \text { Cost of goods sold } & 900,000 \
\hline \text { Tax exempt interest income } & 15,000 \
\hline \text { Dividend income } & 50,000 \
\hline \text { Loss on sale of marketable securities } & 4,000 \
\hline \text { Wages } & 500,000 \
\hline \text { Other operating expenses } & 200,000 \
\hline \text { Depreciation } & 40,000 \
\hline \text { Charitable contributions } & 30,000 \
\hline \text { Additional information: } & \
\hline \text { Depreciation under MACRS } & 80,000 \
\hline
\end{array}$$ The dividend income is from very minor holdings in U.S.stocks.Calculate Bartlett's taxable income,income tax liability and any carryovers generated.

Accepted Answer

@#IMG-DLM& Note that the inter

Question 7

If a corporation's charitable contributions exceed the deduction limitation in a particular year,the excess

Accepted Answer

A) is not deductible in any future year. 
B) becomes a carryforward to a maximum of five succeeding years. 
C) may be carried back to the third preceding year. 
D) is carried over indefinitely. 
A) is not deductible in any future year. 
B) becomes a carryforward to a maximum of five succeeding years. 
C) may be carried back to the third preceding year. 
D) is carried over indefinitely.

Question 8

Montage Corporation has the following income and expense items during the current year: $$\begin{array} { | l | r | } 
\hline \text { Net income from operations (before dividend income) } & \$ 120,000 \
\hline \text { Dividends from } 25 \% \text { owned corporations } & 240,000 \
\hline
\end{array}$$ The allowed dividends-received deduction is

Accepted Answer

A) $120,000. 
B) $234,000. 
C) $156,000. 
D) $240,000. 
A) $120,000. 
B) $234,000. 
C) $156,000. 
D) $240,000.

Question 9

Twenty Corporation reports 2019 taxable income of $200,000.Twenty has a minimum tax credit carryover of $75,000.How much of the MTC carryover can Twenty Corporation use this year?

Accepted Answer

A) $75,000 
B) $58,500 
C) $42,000 
D) $37,500 
A) $75,000 
B) $58,500 
C) $42,000 
D) $37,500

Question 10

If a corporation owns less than 20% of the stock of the distributing corporation,the dividends-received deduction is not allowed for the recipient corporation.

Accepted Answer

A) True 
 B)False

Question 11

In a parent-subsidiary controlled group,the common parent corporation must own at least 80% of the stock of each subsidiary corporation in the group.

Accepted Answer

A) True 
 B)False

Question 12

Topper Corporation makes a liquidating distribution of land to its sole shareholder Tonya.Topper purchased the land several years ago for $150,000,and the land was recently appraised at $120,000 of value.Tonya purchased her stock three years ago for $65,000.What is the amount of gains or losses recognized by Topper Corporation and Tonya?

Accepted Answer

A)  $$\begin{array} { | l | l | } 
\hline \text { Topper Corporation } & \text { Tonya } \
\hline \text { \$0 recognized } & \text { \$0 recognized } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Topper Corporation } & \text { Tonya } \
\hline \$ 0 \text { recognized } & \$ 25,000 \text { gain recognized } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Topper Corporation } & \text { Tonya } \
\hline \$ 30,000 \text { loss recognized } & \$ 0 \text { recognized } \
\hline
\end{array}$$ 
D)  $$\begin{array} {| l | l | } 
\hline \text { Topper Corporation } & \text { Tonya } \
\hline \$ 30,000 \text { loss recognized } & \$ 55,000 \text { gain recognized } \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | l | } 
\hline \text { Topper Corporation } & \text { Tonya } \
\hline \text { \$0 recognized } & \text { \$0 recognized } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Topper Corporation } & \text { Tonya } \
\hline \$ 0 \text { recognized } & \$ 25,000 \text { gain recognized } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Topper Corporation } & \text { Tonya } \
\hline \$ 30,000 \text { loss recognized } & \$ 0 \text { recognized } \
\hline
\end{array}$$ 
D)  $$\begin{array} {| l | l | } 
\hline \text { Topper Corporation } & \text { Tonya } \
\hline \$ 30,000 \text { loss recognized } & \$ 55,000 \text { gain recognized } \
\hline
\end{array}$$

Question 13

Musketeer Corporation has the following income and expense items during the current year: $$\begin{array} { | l | r | } 
\hline \text { Net income from operations (before dividend income) } & \$ 120,000 \
\hline \text { Dividends from } 10 \% \text { owned corporations } & 240,000 \
\hline
\end{array}$$ The allowed dividends-received deduction is

Accepted Answer

A) $120,000. 
B) $180,000. 
C) $156,000. 
D) $240,000. 
A) $120,000. 
B) $180,000. 
C) $156,000. 
D) $240,000.

Question 14

Corporations may be taxed on less than 100% of dividends received due to the dividends-received deduction,while individuals are taxed on all of their dividend income.

Accepted Answer

A) True 
 B)False

Question 15

How does the treatment of a liquidation of a subsidiary into its parent corporation differ from the general rule?

Accepted Answer

A liquidated corporation generally recog

Question 16

A calendar-year corporation has a $75,000 current E&P amount,and a $25,000 positive accumulated E&P balance at the beginning of the year.Shareholders of the corporation have a total basis in outstanding shares of $40,000.The corporation pays a $120,000 distribution to the shareholders.The tax results to the shareholders will be

Accepted Answer

A) dividend income of $100,000 and capital gain of $20,000. 
B) dividend income of $60,000 and capital gain of $60,000. 
C) dividend income of $100,000 and no other consequences. 
D) dividend income of $100,000 and a tax-free return of capital of $20,000. 
A) dividend income of $100,000 and capital gain of $20,000. 
B) dividend income of $60,000 and capital gain of $60,000. 
C) dividend income of $100,000 and no other consequences. 
D) dividend income of $100,000 and a tax-free return of capital of $20,000.

Question 17

A corporation earns $500,000 of current E&P and has an accumulated deficit of $300,000.The corporation pays a $350,000 distribution to its shareholders this year.$200,000 of the distribution will be taxed as a dividend.

Accepted Answer

A) True 
 B)False

Question 18

In computing a corporation's NOL,the dividends-received deduction is allowed in full.

Accepted Answer

A) True 
 B)False

Question 19

Roscoe Corporation owns 85% of Vintage Corporation and 25% of Waxtin Corporation.Vintage owns 60% of Waxtin.Each corporation has only one class of stock.The three corporations form a(an)

Accepted Answer

A) parent-subsidiary controlled group. 
B) brother-sister controlled group. 
C) combined controlled group. 
D) unrelated group of corporations. 
A) parent-subsidiary controlled group. 
B) brother-sister controlled group. 
C) combined controlled group. 
D) unrelated group of corporations.

Question 20

Dixie Corporation distributes $31,000 to its sole shareholder,Sally.At the time of the distribution,Dixie's E&P is $25,000 and Sally's basis in her Dixie stock is $10,000.Sally's basis in her Dixie stock after the distribution is

Accepted Answer

A) $4,000. 
B) $10,000. 
C) $25,000. 
D) $31,000. 
A) $4,000. 
B) $10,000. 
C) $25,000. 
D) $31,000.

Exam 32: Corporations

A corporation has the following capital gains and losses during the current year: LTCG: \ 15,000 LTCL: 21,000 STCG: 3,000 STCL: 8,000 The tax result to the corporation is

A closely held corporation will generally prefer to pay higher salary and lower dividends to shareholders who are employed in the business.

If a corporation's charitable contributions exceed the deduction limitation in a particular year,the excess

Montage Corporation has the following income and expense items during the current year: Net income from operations (before dividend income) \ 120,000 Dividends from 25\% owned corporations 240,000 The allowed dividends-received deduction is

Twenty Corporation reports 2019 taxable income of $200,000.Twenty has a minimum tax credit carryover of $75,000.How much of the MTC carryover can Twenty Corporation use this year?

If a corporation owns less than 20% of the stock of the distributing corporation,the dividends-received deduction is not allowed for the recipient corporation.

In a parent-subsidiary controlled group,the common parent corporation must own at least 80% of the stock of each subsidiary corporation in the group.

Musketeer Corporation has the following income and expense items during the current year: Net income from operations (before dividend income) \ 120,000 Dividends from 10\% owned corporations 240,000 The allowed dividends-received deduction is

Corporations may be taxed on less than 100% of dividends received due to the dividends-received deduction,while individuals are taxed on all of their dividend income.

How does the treatment of a liquidation of a subsidiary into its parent corporation differ from the general rule?

A corporation earns $500,000 of current E&P and has an accumulated deficit of $300,000.The corporation pays a $350,000 distribution to its shareholders this year.$200,000 of the distribution will be taxed as a dividend.

In computing a corporation's NOL,the dividends-received deduction is allowed in full.

Roscoe Corporation owns 85% of Vintage Corporation and 25% of Waxtin Corporation.Vintage owns 60% of Waxtin.Each corporation has only one class of stock.The three corporations form a(an)

Dixie Corporation distributes $31,000 to its sole shareholder,Sally.At the time of the distribution,Dixie's E&P is $25,000 and Sally's basis in her Dixie stock is $10,000.Sally's basis in her Dixie stock after the distribution is

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