Exam 20: Corporations and Partnerships

Even though partnerships are not subject to income tax, they are required to file income tax returns.

Only C corporations are eligible to carry back a charitable contribution that is unusable in the current year due to income limitations.

Teal Corporation is incorporated in November 2020.The following formation expenses are incurred in 2020: Legal and accounting expenses incident to organization \ 4,000 Expenses of temporary directors and organizational meetings of 2,000 directors and shareholders Expenditures connected with the transfer of assets to Teal 3,000 Except for the legal and accounting expenses that are paid in 2021, all other expenses are paid in 2020.If Teal Corporation uses the cash basis and adopts a calendar year for tax purposes, the maximum amount of organizational expenditures it can elect to expense for 2020 is.

A shareholder in an S corporation who makes a loan to the corporation, increases the basis in his stock investment.

Using the legend provided, classify each statement accordingly. -The corporation's domestic production activities deduction is claimed by the corporation (not the shareholders).

Changes in the liabilities (trade accounts payable, bank loans, etc.) of a partnership will not affect the basis of a partnership interest.

As of January 1, 2020, Amanda, the sole shareholder of Tern (a calendar year S corporation), had a basis of $50,000 in her stock.During 2020, Tern had a net operating loss of $100,000 and distributed a $70,000 dividend to Amanda.What is Amanda's basis in her Tern stock as of January 1, 2021?

Only a corporation that qualifies under state law can be treated as a corporation for Federal income tax purposes.

Using the legend provided, classify each statement accordingly. -The allowable deduction for charitable contributions is subject to percentage limitations.

Guaranteed payments are deductible by the partnership and are taxable to the partner receiving the payments.

Using the legend provided, classify each statement accordingly. -Tax-exempt income received by the corporation will pass through to its shareholders as tax-exempt income.

Sarah, a sole shareholder, rents property to her corporation.The rent income she receives from the lease is a constructive dividend to Sarah.

Mel, Fred, and Mary form Canary Corporation.Both Mel and Fred contribute cash of $250,000, and Mary contributes land (basis of $100,000; fair market value of $300,000).Each transferor receives one-third of Canary's shares, and Mary also receives $50,000 in cash.Which, if any, of the following choices is a result of the incorporation?

Alabaster Corporation, a calendar year taxpayer, was formed on July 1, 2020, and incurred organizational expenditures of $52,000.Its deduction for these expenditures for 2020 can be a:

Using the legend provided, classify each statement accordingly. -Cannot be a shareholder in another corporation.

A partner's basis in the partnership interest is increased by his or her share of the tax-exempt income received by the partnership.

Schedule M-2 of Form 1120 reconciles unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at year-end.

The Schedule M-1 to Form 1120 starts with taxable income and, after making various negative and positive adjustments, ends with net income per books.

The qualified business income (QBI) deduction is calculated at the S corporation level and reported to each shareholder.

Jordan and his two brothers are equal owners in Taupe Partnership.If Jordan sells business property (basis of $230,000; fair market value of $280,000) to Taupe for $280,000, he must recognize the $50,000 realized gain.