Question 1

The transferee corporation's basis in property received in a Sec. 351 exchange is

Accepted Answer

A)  the transferor's basis for the property plus gain recognized by the transferee corporation. 
B)  the transferor's basis for the property plus gain recognized by the transferor. 
C)  the FMV of the property received. 
D)  the transferee corporation's basis in the stock exchanged. 
A)  the transferor's basis for the property plus gain recognized by the transferee corporation. 
B)  the transferor's basis for the property plus gain recognized by the transferor. 
C)  the FMV of the property received. 
D)  the transferee corporation's basis in the stock exchanged.

Question 2

In January of the current year, Rae purchases 100% of Sun Corporation stock for $30,000. Sun Corporation reports taxable income of $25,000 in the current year, on which it pays tax of $3,750. None of the remaining
$21,250 is distributed to Rae. However, on January 1 of the next year, Rae sells her stock to Lee for $51,250. What are the tax consequences to Rae of the sale?

Accepted Answer

Rae must report a capital gain

Question 3

On January 20 of the current year, a group of ten individuals organize an LLC to conduct an ink- making business in Florida. This year, the LLC is an eligible entity under the check- the- box regulations. How will the LLC be taxed?

Accepted Answer

The owners may elect to have t

Question 4

Identify which of the following statements is false.

Accepted Answer

A)  A sole proprietor is considered to be an employee of the business. 
B)  A sole proprietorship is a separate taxable entity. 
C)  A solely owned corporation is a sole proprietorship. 
D)  All of the above are false. 
A)  A sole proprietor is considered to be an employee of the business. 
B)  A sole proprietorship is a separate taxable entity. 
C)  A solely owned corporation is a sole proprietorship. 
D)  All of the above are false.

Question 5

In which of the following independent situations is the Sec. 351 control requirement met?
a) Jane transfers property to Jet Corporation for 75% of Jet Corporation's stock, and Susan provides services to J Corporation for the remaining 25% of Jet Corporation stock.
b) Paul transfers property to Pride Corporation for 60% of Pride's stock, and Bob transfers property worth $15,0 performs services worth $25,000 for the remaining 40% of Pride's stock.
c) Herb and his wife Carolyn each have owned 50% of the 100 outstanding shares of Wykert Corporation stock was formed three years ago. In the current year, their daughter, Cindy, transfers property to Wykert Corporation newly issued shares of Wykert stock.
d) John and Pam develop a plan to form PJ Corporation on May 2 of this year. John transfers property worth $5 for 50 shares of PJ Corporation stock. As part of the single plan to incorporate, Pam transfers $50,000 cash for 50 of PJ Corporation stock on July 1.
e) Assume the same facts as in Part (d), except that John has a prearranged plan to sell 30 of his shares to Steven September 1.

Accepted Answer

a) Not met. Transferors of property rece

Question 6

Jacque, a single nonresident alien, is in the United States for 80 days in the current year engaging in the conduct of a U.S. trade or business. Jacque has $75,000 of sales income earned while in the United States and $30,000 of non- U.S. sales income earned while he was outside the United States. How will the income be taxed and how will the tax be collected?

Accepted Answer

The $30,000 of non- U.S. sales commissio

Question 7

In accordance with the rules that apply to corporate formation, which one of the following features does not make an issue of preferred stock "nonqualified"?

Accepted Answer

A)  The stock is limited and preferred as to dividends. 
B)  The dividend rate on the stock may not vary with interest rates, commodity prices, or other similar indices. 
C)  The corporation is either required to redeem the stock or is likely to exercise a right to redeem the stock. 
D)  The shareholder can require the corporation to redeem the stock. 
A)  The stock is limited and preferred as to dividends. 
B)  The dividend rate on the stock may not vary with interest rates, commodity prices, or other similar indices. 
C)  The corporation is either required to redeem the stock or is likely to exercise a right to redeem the stock. 
D)  The shareholder can require the corporation to redeem the stock.

Question 8

Identify which of the following statements is false.

Accepted Answer

A)  A taxpayer who is physically present in a foreign country for 330 full days out of a 12- month period satisfies the bona fide foreign resident test. 
B)  The foreign- earned income exclusion is $104,100 in 2018. 
C)  The primary purpose for the foreign- earned income exclusion is to prevent double taxation of income. 
D)  All of the above are false. 
A)  A taxpayer who is physically present in a foreign country for 330 full days out of a 12- month period satisfies the bona fide foreign resident test. 
B)  The foreign- earned income exclusion is $104,100 in 2018. 
C)  The primary purpose for the foreign- earned income exclusion is to prevent double taxation of income. 
D)  All of the above are false.

Question 9

Max transfers the following properties to a newly created corporation for $90,000 of stock and $10,0 in a transaction that qualifies under Sec. 351.   Max's recognized gain is

Accepted Answer

A)  $3,000. 
B)  $5,000. 
C)  $10,000. 
D)  $7,000. 
A)  $3,000. 
B)  $5,000. 
C)  $10,000. 
D)  $7,000.

Question 10

This year, John, Meg, and Karen form Frost Corporation. John contributes land purchased as an investment four years ago for $15,000 that has a $30,000 FMV in exchange for 30 shares of Frost stock. Meg contributes machinery (Sec. 1231 property) purchased four years ago and used in her business having a $35,000 adjusted basis and a $30,000 FMV in exchange for 30 shares of Frost stock. Karen contributes services worth $20,000 in exchange for 20 shares of Frost stock.
a) What is the amount of John's recognized gain or loss?
b) What is John's basis in his Frost shares? When does his holding period begin?
c) What is the amount of Meg's recognized gain or loss?
d) What is Meg's basis in her Frost shares? When does her holding period begin?
e) How much income, if any, must Karen recognize?
f) What is Karen's basis in her Frost shares? When does her holding period begin?
g) What is Frost Corporation's basis in the land and the machinery? When does its holding period begin? How Frost Corporation treat the amount paid to Karen for her services?

Accepted Answer

a) Since Sec. 351 does not apply because

Question 11

The City of Portland gives Data Corporation $60,000 cash and land worth $100,000 to induce it to move. The cash was not spent during the 12 months following contribution. The contribution results in

Accepted Answer

A)  a zero basis in the land and a $60,000 basis reduction in other assets. 
B)  income recognition in the amount of $160,000 to the corporation at the time of contribution. 
C)  income recognition in the amount of $60,000 to the corporation 12 months after the time of contribution. 
D)  a zero basis in the land and $60,000 ordinary income to the corporation 24 months after the time of contribution if the cash is not used to purchase an asset. 
A)  a zero basis in the land and a $60,000 basis reduction in other assets. 
B)  income recognition in the amount of $160,000 to the corporation at the time of contribution. 
C)  income recognition in the amount of $60,000 to the corporation 12 months after the time of contribution. 
D)  a zero basis in the land and $60,000 ordinary income to the corporation 24 months after the time of contribution if the cash is not used to purchase an asset.

Question 12

Compare the foreign tax payment claimed as a deduction versus a similar payment claimed as a credit. Create an example to demonstrate the tax effect. Use 28% as the marginal tax rate in your example.

Accepted Answer

@#IMG-DLM& The credit is usually the most advantag

Question 13

Which of the following statements is true?

Accepted Answer

A)  C corporation shareholders are taxed based on their proportionate share of income. 
B)  Shareholders in a C corporation can use C corporation losses to offset shareholder income from other sources. 
C)  Distributions of C corporation income are not taxable. 
D)  C corporation losses remain in the C corporation and can offset capital gain income from other years. 
A)  C corporation shareholders are taxed based on their proportionate share of income. 
B)  Shareholders in a C corporation can use C corporation losses to offset shareholder income from other sources. 
C)  Distributions of C corporation income are not taxable. 
D)  C corporation losses remain in the C corporation and can offset capital gain income from other years.

Question 14

U.S. shareholders are not taxed on dividends paid by a foreign subsidiary as long as the earnings are not remitted to them as dividends.

Accepted Answer

A) True 
 B)False

Question 15

Identify which of the following statements is true.

Accepted Answer

A)  An individual, who is a bona fide resident of a foreign country for at least one full tax year, can claim the foreign- earned income exclusion for all days on which he/she is a resident of the foreign country and physically present in that country. 
B)  Fringe benefits that are excluded from gross income under a Code Section other than Sec. 911 reduce the annual dollar ceiling for the foreign income exclusion. 
C)  An individual who is physically present in a foreign country for 330 full days out of a 12- month period can claim the foreign- earned income exclusion only for the days in the 12- month period he/she is physically present in a foreign country. 
D)  All of the above are false. 
A)  An individual, who is a bona fide resident of a foreign country for at least one full tax year, can claim the foreign- earned income exclusion for all days on which he/she is a resident of the foreign country and physically present in that country. 
B)  Fringe benefits that are excluded from gross income under a Code Section other than Sec. 911 reduce the annual dollar ceiling for the foreign income exclusion. 
C)  An individual who is physically present in a foreign country for 330 full days out of a 12- month period can claim the foreign- earned income exclusion only for the days in the 12- month period he/she is physically present in a foreign country. 
D)  All of the above are false.

Question 16

Overseas business activities conducted by U.S. corporations receive which one of the following favorable tax breaks?

Accepted Answer

A)  Foreign subsidiaries of U.S. corporations are exempt from the U.S. corporate income tax unless they earn U.S.- source investment or trade or business income. 
B)  Domestic corporations conducting business in a foreign country through a branch office or facility can exempt non- U.S. income from the U.S. corporate income tax. 
C)  Foreign subsidiaries of U.S. corporations are always exempt from the U.S. corporate income tax even if they earn U.S.- source investment or trade or business income. 
D)  All of the above are correct. 
A)  Foreign subsidiaries of U.S. corporations are exempt from the U.S. corporate income tax unless they earn U.S.- source investment or trade or business income. 
B)  Domestic corporations conducting business in a foreign country through a branch office or facility can exempt non- U.S. income from the U.S. corporate income tax. 
C)  Foreign subsidiaries of U.S. corporations are always exempt from the U.S. corporate income tax even if they earn U.S.- source investment or trade or business income. 
D)  All of the above are correct.

Question 17

A foreign corporation is owned by five unrelated individuals. John, Sam, and David are U.S. citizens who own 30%, 18% and 9%, respectively, of the foreign corporation's single class of stock. Alberto and Manuel are nonresident aliens who own 37% and 6%, respectively, of the foreign corporation's stock. Which of the following statements is true?

Accepted Answer

A)  There are two "U.S. shareholders" and the foreign corporation is not a controlled foreign corporation (CF
C) . 
B)  There are three "U.S. shareholders" and the foreign corporation is not a controlled foreign corporation (CF
C) . 
C)  There are two "U.S. shareholders" and the foreign corporation is a controlled foreign corporation (CF
C) . 
D)  There are three "U.S. shareholders" and the foreign corporation is a controlled foreign corporation (CF
C) . 
A)  There are two "U.S. shareholders" and the foreign corporation is not a controlled foreign corporation (CF
C) . 
B)  There are three "U.S. shareholders" and the foreign corporation is not a controlled foreign corporation (CF
C) . 
C)  There are two "U.S. shareholders" and the foreign corporation is a controlled foreign corporation (CF
C) . 
D)  There are three "U.S. shareholders" and the foreign corporation is a controlled foreign corporation (CF
C) .

Question 18

For Sec. 351 purposes, the term "property" does not include

Accepted Answer

A)  cash. 
B)  services rendered. 
C)  accounts receivable. 
D)  inventory. 
A)  cash. 
B)  services rendered. 
C)  accounts receivable. 
D)  inventory.

Question 19

Discuss the IRS reporting requirements under Sec. 351.

Accepted Answer

Both the transferor- shareholders and th

Question 20

A U.S. citizen, who uses a calendar year as his tax year, is transferred to a foreign country by his employer. The U.S. citizen arrived in the foreign country on November 3 of last year. Residency is expected to be maintained in the foreign country until August 4 of next year. None of the years are a leap year. The first year for which an earned income exclusion can be claimed is

Accepted Answer

A)  next year. 
B)  last year. 
C)  the current year. 
D)  The earned income exclusion cannot be claimed. 
A)  next year. 
B)  last year. 
C)  the current year. 
D)  The earned income exclusion cannot be claimed.

The transferee corporation's basis in property received in a Sec. 351 exchange is

On January 20 of the current year, a group of ten individuals organize an LLC to conduct an ink- making business in Florida. This year, the LLC is an eligible entity under the check- the- box regulations. How will the LLC be taxed?

Identify which of the following statements is false.

In accordance with the rules that apply to corporate formation, which one of the following features does not make an issue of preferred stock "nonqualified"?

Identify which of the following statements is false.

Max transfers the following properties to a newly created corporation for $90,000 of stock and $10,0 in a transaction that qualifies under Sec. 351. Max's recognized gain is

The City of Portland gives Data Corporation $60,000 cash and land worth $100,000 to induce it to move. The cash was not spent during the 12 months following contribution. The contribution results in

Compare the foreign tax payment claimed as a deduction versus a similar payment claimed as a credit. Create an example to demonstrate the tax effect. Use 28% as the marginal tax rate in your example.

Which of the following statements is true?

U.S. shareholders are not taxed on dividends paid by a foreign subsidiary as long as the earnings are not remitted to them as dividends.

Identify which of the following statements is true.

Overseas business activities conducted by U.S. corporations receive which one of the following favorable tax breaks?

For Sec. 351 purposes, the term "property" does not include

Discuss the IRS reporting requirements under Sec. 351.

Tax Research

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

Filters

Exam 2: Corporate Formations and Capital Structure

The transferee corporation's basis in property received in a Sec. 351 exchange is

On January 20 of the current year, a group of ten individuals organize an LLC to conduct an ink- making business in Florida. This year, the LLC is an eligible entity under the check- the- box regulations. How will the LLC be taxed?

Identify which of the following statements is false.

In accordance with the rules that apply to corporate formation, which one of the following features does not make an issue of preferred stock "nonqualified"?

Identify which of the following statements is false.

Max transfers the following properties to a newly created corporation for $90,000 of stock and $10,0 in a transaction that qualifies under Sec. 351. Max's recognized gain is

The City of Portland gives Data Corporation $60,000 cash and land worth $100,000 to induce it to move. The cash was not spent during the 12 months following contribution. The contribution results in

Compare the foreign tax payment claimed as a deduction versus a similar payment claimed as a credit. Create an example to demonstrate the tax effect. Use 28% as the marginal tax rate in your example.

Which of the following statements is true?

U.S. shareholders are not taxed on dividends paid by a foreign subsidiary as long as the earnings are not remitted to them as dividends.

Identify which of the following statements is true.

Overseas business activities conducted by U.S. corporations receive which one of the following favorable tax breaks?

For Sec. 351 purposes, the term "property" does not include

Discuss the IRS reporting requirements under Sec. 351.

Tax Research

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

Filters