Question 1

Which of the following statements best describes the "built-in loss" rules that apply to property transferred to a corporation under section 351?

Accepted Answer

A) If the basis of a property transferred to a corporation under section 351 exceeds its fair market value,the corporation will always take a tax basis in the property equal to the property's fair market value. 
B) If the basis of a property transferred to a corporation under section 351 exceeds its fair market value,the corporation will always take a tax basis in the property equal to the property's tax basis in the hands of the shareholder. 
C) If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value,the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate fair market value of the property. 
D) If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value,the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate tax basis of the property. 
A) If the basis of a property transferred to a corporation under section 351 exceeds its fair market value,the corporation will always take a tax basis in the property equal to the property's fair market value. 
B) If the basis of a property transferred to a corporation under section 351 exceeds its fair market value,the corporation will always take a tax basis in the property equal to the property's tax basis in the hands of the shareholder. 
C) If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value,the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate fair market value of the property. 
D) If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value,the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate tax basis of the property.

Question 2

Which of the following statements regarding capital gains and losses is false?

Accepted Answer

A) In terms of tax treatment,corporations generally prefer capital gains to ordinary income. 
B) Like individuals,corporations can deduct $3,000 of net capital losses against ordinary income in a given year. 
C) Corporations can carryback net capital losses three years and they can carry them forward for five years. 
D) Corporations must apply capital loss carrybacks and carryovers in a particular order. 
A) In terms of tax treatment,corporations generally prefer capital gains to ordinary income. 
B) Like individuals,corporations can deduct $3,000 of net capital losses against ordinary income in a given year. 
C) Corporations can carryback net capital losses three years and they can carry them forward for five years. 
D) Corporations must apply capital loss carrybacks and carryovers in a particular order.

Question 3

The rules for consolidated reporting for financial statement purposes are the same as the rules for consolidated reporting for tax purposes.

Accepted Answer

A) True 
 B)False

Question 4

A nonqualified stock option will create a permanent book-tax difference in the year it is exercised if the bargain element is different from the estimated value of the option for financial accounting purposes when it was issued.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is allowable as a deduction in calculating a corporation's net operating loss?

Accepted Answer

A) Charitable contribution deduction. 
B) Net operating loss carryover from previous year. 
C) Net capital loss carryback. 
D) None of the choices are correct. 
A) Charitable contribution deduction. 
B) Net operating loss carryover from previous year. 
C) Net capital loss carryback. 
D) None of the choices are correct.

Question 6

Which of the following statements regarding charitable contributions is false?

Accepted Answer

A) Only contributions made to qualified charitable organizations are deductible. 
B) Charitable contribution deductions are subject to a limitation based on the corporation's taxable income (before certain deductions). 
C) Corporations can qualify to deduct a contribution before actually paying the contribution to the charity. 
D) The amount deductible for non-cash contributions is always the adjusted basis of the property donated. 
A) Only contributions made to qualified charitable organizations are deductible. 
B) Charitable contribution deductions are subject to a limitation based on the corporation's taxable income (before certain deductions). 
C) Corporations can qualify to deduct a contribution before actually paying the contribution to the charity. 
D) The amount deductible for non-cash contributions is always the adjusted basis of the property donated.

Question 7

iScope Inc.paid $3,000 in interest on a loan it used to purchase municipal bonds.What is the nature of the book-tax difference relating to this expense?

Accepted Answer

A) Permanent; favorable. 
B) Permanent; unfavorable. 
C) Temporary; favorable. 
D) Temporary; unfavorable. 
A) Permanent; favorable. 
B) Permanent; unfavorable. 
C) Temporary; favorable. 
D) Temporary; unfavorable.

Question 8

NOL and capital loss carryovers are deductible in calculating the charitable contribution limit modified taxable income,while capital loss carrybacks are not.

Accepted Answer

A) True 
 B)False

Question 9

In 2018,Smith Traders Inc.reported a net operating loss of $100,000.In 2019,before the NOL deduction,it reported taxable income of $50,000.What is Smith Traders' 2019 taxable income after the NOL deduction and what is its NOL carryover to 2020?

Accepted Answer

$40,000 taxable income; $60,000 carryove

Question 10

The dividends received deduction cannot cause a net operating loss.The deduction can reduce income to zero but not below zero.

Accepted Answer

A) True 
 B)False

Question 11

Corporations may carry excess charitable contributions forward five years,but they may not carry them back.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

Accepted Answer

A) Net capital loss carrybacks. 
B) Charitable contributions. 
C) NOL carryovers. 
D) None of the choices are correct. 
A) Net capital loss carrybacks. 
B) Charitable contributions. 
C) NOL carryovers. 
D) None of the choices are correct.

Question 13

Sami transferred property with a fair market value of $600 and a tax basis of $300 to a corporation in exchange for stock with a fair market value of $600.In addition,Sami received stock with a fair market value of $50 in exchange for services she provided to the corporation in the incorporation process.Which of the following statements best describes the tax result to Sami as a result of the exchanges?

Accepted Answer

A) Sami will recognize $50 of compensation income,but she can count the shares of stock she receives in exchange for services in determining if the control test is met under section 351. 
B) Sami will recognize $50 of compensation income,but she cannot count the shares of stock she receives in exchange for services in determining if the control test is met under section 351. 
C) Sami will not recognize $50 of compensation income,but she can count the shares of stock she receives in exchange for services in determining if the control test is met under section 351. 
D) Sami will not recognize $50 of compensation income,and she cannot count the shares of stock she receives in exchange for services in determining if the control test is met under section 351. 
A) Sami will recognize $50 of compensation income,but she can count the shares of stock she receives in exchange for services in determining if the control test is met under section 351. 
B) Sami will recognize $50 of compensation income,but she cannot count the shares of stock she receives in exchange for services in determining if the control test is met under section 351. 
C) Sami will not recognize $50 of compensation income,but she can count the shares of stock she receives in exchange for services in determining if the control test is met under section 351. 
D) Sami will not recognize $50 of compensation income,and she cannot count the shares of stock she receives in exchange for services in determining if the control test is met under section 351.

Question 14

To meet the control test under section 351,a taxpayer transferring property to a corporation must by himself own 80 percent or more of the corporation's voting stock and 80 percent of each class of nonvoting stock after the transfer even if there are other transferors of property.

Accepted Answer

A) True 
 B)False

Question 15

Han transferred land he held as an investment to his corporation in a section 351 transaction.Han had held the land for two years prior to the transfer.Han's holding period in the stock he received in the exchange includes the period for which he held the land before transferring it to the corporation.

Accepted Answer

A) True 
 B)False

Question 16

During the year,AutoUSA Inc.received $4,600,000 of book income,including $20,000 of interest income from tax-exempt municipal bonds.AutoUSA reported $3,600,000 of regular business expenses.If it made $200,000 of estimated tax payments (prepayments)throughout the tax year,what is its tax due or tax refund when it files its return?

Accepted Answer

None

Question 17

Keegan incorporated his sole proprietorship by transferring inventory,a building,and land to the corporation in return for 100 percent of the corporation's stock.The property transferred to the corporation had the following fair market values and tax bases.
 $\begin{array} { l r r r r } 
& \text { FMV } & \text { Tax Basis } \
\text { Irventory } & \$  20,000 & \$  14,000 \
\text { Buildirin } & 70,000 &  50,000 \
\text { Land } &\underline { 150,000 }&\underline {100,000} \
\text { Total } &\underline { \$ 240,000 }& \underline {\$ 164,000}
\end{array}$ The fair market value of the corporation's stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Keegan.
What amount of gain or loss does Keegan realize on the transfer of the property to his corporation?

Accepted Answer

Gain reali

Question 18

Corporations calculate adjusted gross income (AGI)in the same way as individuals.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not calculated in the corporate income tax formula?

Accepted Answer

A) Gross income. 
B) Adjusted gross income. 
C) Taxable income. 
D) Income tax liability. 
A) Gross income. 
B) Adjusted gross income. 
C) Taxable income. 
D) Income tax liability.

Question 20

Netgate Corporation's gross regular tax liability for the year was $95,375.What was its taxable income? Note: New Corporate income tax rate has been mentioned as "21% on all taxable income" as per the recent change.

Accepted Answer

$454,167=

Which of the following statements best describes the "built-in loss" rules that apply to property transferred to a corporation under section 351?

Which of the following statements regarding capital gains and losses is false?

The rules for consolidated reporting for financial statement purposes are the same as the rules for consolidated reporting for tax purposes.

A nonqualified stock option will create a permanent book-tax difference in the year it is exercised if the bargain element is different from the estimated value of the option for financial accounting purposes when it was issued.

Which of the following is allowable as a deduction in calculating a corporation's net operating loss?

Which of the following statements regarding charitable contributions is false?

iScope Inc.paid $3,000 in interest on a loan it used to purchase municipal bonds.What is the nature of the book-tax difference relating to this expense?

NOL and capital loss carryovers are deductible in calculating the charitable contribution limit modified taxable income,while capital loss carrybacks are not.

In 2018,Smith Traders Inc.reported a net operating loss of $100,000.In 2019,before the NOL deduction,it reported taxable income of $50,000.What is Smith Traders' 2019 taxable income after the NOL deduction and what is its NOL carryover to 2020?

The dividends received deduction cannot cause a net operating loss.The deduction can reduce income to zero but not below zero.

Corporations may carry excess charitable contributions forward five years,but they may not carry them back.

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

To meet the control test under section 351,a taxpayer transferring property to a corporation must by himself own 80 percent or more of the corporation's voting stock and 80 percent of each class of nonvoting stock after the transfer even if there are other transferors of property.

Corporations calculate adjusted gross income (AGI)in the same way as individuals.

Which of the following is not calculated in the corporate income tax formula?

Netgate Corporation's gross regular tax liability for the year was $95,375.What was its taxable income? Note: New Corporate income tax rate has been mentioned as "21% on all taxable income" as per the recent change.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview dependents and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Individual From Agi Deductions

Filters

Exam 12: Corporate Formations and Operations

Which of the following statements best describes the "built-in loss" rules that apply to property transferred to a corporation under section 351?

Which of the following statements regarding capital gains and losses is false?

The rules for consolidated reporting for financial statement purposes are the same as the rules for consolidated reporting for tax purposes.

A nonqualified stock option will create a permanent book-tax difference in the year it is exercised if the bargain element is different from the estimated value of the option for financial accounting purposes when it was issued.

Which of the following is allowable as a deduction in calculating a corporation's net operating loss?

Which of the following statements regarding charitable contributions is false?

iScope Inc.paid $3,000 in interest on a loan it used to purchase municipal bonds.What is the nature of the book-tax difference relating to this expense?

NOL and capital loss carryovers are deductible in calculating the charitable contribution limit modified taxable income,while capital loss carrybacks are not.

In 2018,Smith Traders Inc.reported a net operating loss of $100,000.In 2019,before the NOL deduction,it reported taxable income of $50,000.What is Smith Traders' 2019 taxable income after the NOL deduction and what is its NOL carryover to 2020?

The dividends received deduction cannot cause a net operating loss.The deduction can reduce income to zero but not below zero.

Corporations may carry excess charitable contributions forward five years,but they may not carry them back.

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

To meet the control test under section 351,a taxpayer transferring property to a corporation must by himself own 80 percent or more of the corporation's voting stock and 80 percent of each class of nonvoting stock after the transfer even if there are other transferors of property.

Corporations calculate adjusted gross income (AGI)in the same way as individuals.

Which of the following is not calculated in the corporate income tax formula?

Netgate Corporation's gross regular tax liability for the year was $95,375.What was its taxable income? Note: New Corporate income tax rate has been mentioned as "21% on all taxable income" as per the recent change.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview dependents and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Individual From Agi Deductions

Filters