Exam 11: The Corporate Income Tax

The Heal Yourself Health Care Corporation, a service corporation, has accumulated earnings of $375,000 and the corporation can establish a reasonable need for $125,000.Calculate the amount of the accumulated earnings tax, if any, that will be imposed on the corporation.

The income of an S corporation is computed in much the same manner as that of a partnership.

Which of the following corporations is allowed to make an S corporation election?

A corporation must reconcile, to the IRS's satisfaction, the differences between net income as shown on the company's books and taxable income (before special deductions and net operating losses)as shown on the tax return.

Robert, Kim, Tony, and Sharon decided to form the Cash Cow Corporation.In exchange for 40 percent of the stock, Robert contributed an apartment building with a fair market value of $700,000 and subject to a liability of $300,000.Robert's basis in the apartment building is $225,000.Kim contributed warehouse storage units worth $450,000 in exchange for 40 percent of the stock plus $50,000 in cash from the corporation.Her basis in the warehouse is $125,000.Tony contributed $100,000 cash for 10 percent of the stock.Sharon is performing services worth $100,000 for 10 percent of the stock. a.What is the recognized gain or recognized income for:1.Robert2.Kim3.Tony4.Sharon b.What is the basis in the stock for:1.Robert2.Kim3.Tony4.Sharon c.What is the corporation's basis in:1.The apartment building2.The warehouse

For the year ended December 31, 2018, Prunus, Inc., reported net income before federal income tax expense of $800,000 per the corporation's books.This figure included the following items:? Interest income on tax-exempt municipal securities \3 0,000 Loss on sale of land acquired in 1985 as an investment \4 0,000 Interest expense on loan to purchase tax-exempt municipal securities \1 0,000 What is the taxable income of Prunus, Inc.for 2018?

If a corporation is unable to deduct a capital loss against capital gains for a particular tax year, it loses the tax benefit since the loss may not be carried to other tax years.

During the current year, the Melaleuca Corporation received dividends from 50-percent-owned domestic corporations in the amount of $100,000. a.​Assuming that in addition to the dividend income the corporation has gross income from operations of $250,000 and deductible operating expenses of $210,000, calculate the amount of the corporation's dividends received deduction for the current year. b.​​If, instead of $250,000 in gross income from operations, the corporation has $200,000 in gross income from operations and the same amount of dividends and expenses, calculate the amount of the corporation's dividends received deduction for the current year.

A corporation owning 80 percent or more of the stock of another corporation has a dividends-received deduction of 100 percent.

Ficus, Inc.began business on March 1, 2018, and elected to file its income tax return on a calendar-year basis.The corporation incurred $800 in organizational expenditures.Assuming the corporation does not elect to expense but chooses to amortize the costs over 180 months, the maximum allowable deduction for amortization of organizational expenditures in 2018 is:

The Bay Fig Corporation has $350,000 of taxable income from operations for the current year, and dividends of $50,000 received from 10-percent-owned domestic corporations.How much is the Bay Fig Corporation's dividends received deduction for the current year?

11111111111111111111 -Roberta and Sally formed the Alder Corporation on October 1, 2018.On the same date, Roberta paid $75,000 cash to Alder Corporation for 1,500 shares of the corporation's common stock.Simultaneously, Sally received 100 shares of Alder Corporation's stock for services rendered.How much should Sally include in her taxable income for 2018, and what will be the basis of her Alder Corporation stock? Taxable Income $\quad$ Basis of Stock a. $\quad$ $\$ 0$ $\quad$ $\quad$ $\quad$ $\quad$$\$ 0$ b. $\quad$$\$ 0 \quad\quad\quad\quad \$ 5,000$ c. $\quad$ $\$ 5,000 \quad \quad\quad \$ 0$ d. $\quad$ $\$ 5,000 \quad\quad \$ 5,000$ e. None of the above

The Nandina Corporation was formed and began operations on July 1, 2018, and incurred the following expenses during the year: State fees for incorporation \8 00 Legal and accounting fees incident to organization 1,700 Legal fees for the issuance of stock 600 Temporaty directors' fees 1,100 If the corporation chooses not to expense but rather amortizes organizational costs over 180 months, what is the amount of its amortization expense for 2018?

As a general rule, the transfer of property by a taxpayer to a corporation in exchange solely for 100 percent of the stock does not result in a taxable transaction.