Exam 3: The Corporate Income Tax

Two days before the ex-dividend date, Drexel Corporation buys 100 shares of Zebra Corporation stock (less than 1%)for $200,000. Drexel Corporation receives $10,000 of dividends from Zebra Corporation. Two weeks after the ex-dividend date, Drexel Corporation sells the Zebra Corporation stock for $190,000. Which of the following statements is correct?

Identify which of the following statements is false.

Edison Corporation is organized on July 31. The corporation starts business on August 10. The corporation adopts a November 30 fiscal year end. The following expenses are incurred during the year: What is the maximum amount of organizational expenditures that can be deducted by the corporation for its first tax year ending November 30?

Money Corporation has the following income and expenses for the tax year: What is Money's net operating loss?

Identify which of the following statements is false.

In February of the current year, Brent Corporation donates computer equipment that it purchased six months ago to Eastside High School for use in its educational program. The donated property had a $20,000 adjusted basis to Brent and a $40,000 FMV. What is the amount of the gift?

What are the various levels of stock ownership by corporate shareholders for the dividends-received deduction (DRD)? What is the DRD% for each level of ownership?

Zerotech Corporation donates the following property to an elementary school: • Computer printer purchased three years ago for $1,000. The printer has a $500 FMV and $0 adjusted basis on contribution date. • Computer equipment acquired one year ago at a cost of $5,000. The equipment has an $8,000 FMV and $0 adjusted basis on contribution date. • Computer software acquired two months ago at a cost of $10,000. The software will be used in a prekindergarten program. Its FMV on the contribution date is $10,000 and it has an adjusted basis of $0. a)Identify any donation qualifying for special treatment. b)What is Zerotech's charitable contribution deduction?

Identify which of the following statements is true.

Baxter Corporation is a personal service corporation. Baxter Corporation has taxable income of $10,000. Baxter Corporation's tax is

Identify which of the following is false.

James Corporation purchased residential real estate in 2013 for $225,000, of which $25,000 was allocated to land and $200,000 was allocated to the building. James Corporation took straight-line MACRS deductions of $30,000 during the years 2013-2018. In 2019, James Corporation sold the property for $285,000, of which $60,000 is allocated to the land and $225,000 is allocated to the building. What are the amounts and character of James Corporation's recognized gain or loss on the sale?

Sun and Moon Corporations each have only one class of stock outstanding. Their stock ownership is shown below. Which of the four stock ownership changes that are illustrated is the minimum change that is needed if Sun and Moon Corporations are to be brother-sister corporations under the 50% requirements? (Assume the two corporations are equally valued.)

How does the use of a net capital loss differ for individual and corporate taxpayers?

Booth Corporation sells a building classified as a residential rental property for $200,000. The MACRS straight-line depreciation taken is $20,000 and the adjusted basis of the building is $170,000. Booth Corporation must recognize ordinary income of

Chambers Corporation is a calendar year taxpayer using the accrual method of accounting. Last year its board of directors authorizes a $20,000 contribution to the Boy Scouts. Chambers pays the contribution on March 12 of the current year. What is the maximum contribution allowed for last year? What is the maximum contribution allowed in the current year?

Gilbreath Corporation is a C corporation and has the following items of income and expense during the current year. What is taxable income before limitation? What is the net business interest expense? What is adjusted taxable income for purposes of the net business income limitation? How much of the net business interest expense may Gilbreath deduct during the current year?

During the year, Soup Corporation contributes some of its inventory to a qualified charity for use in feeding the needy. The inventory has an FMV of $85,000 and an adjusted basis of $25,000. What is the amount of Soup Corporation's charitable contribution deduction for the donation of the inventory as determined without regard to the overall charitable contribution limitation?

Francine Corporation reports the following income and expense items for the tax year ending December 31: What is Francine Corporation's taxable income?

A C corporation must use a calendar year as its tax year unless it has a substantial business purpose to use a fiscal year.