Exam 32: Corporations

The books and records of Finton Corporation,an accrual method taxpayer,reflect the following: Based on the above,what is the amount of Greg Corporation's current earnings and profits for this year?

A corporation redeems 10 percent of the stock of each shareholder in a family-owned corporation.The shareholders will recognize capital gains on the sale of their stock back to the corporation.

Total Corporation has earned $75,000 current E&P and has an accumulated E&P deficit from prior year of $25,000.The corporation pays a $100,000 distribution to shareholders.Shareholders of the corporation have a total stock basis of $40,000.The tax results of the distributions to the shareholders will be

Corporations may be taxed on less than 100% of dividends received due to the dividends-received deduction,while individuals are taxed on all of their dividend income.

A corporation has regular taxable income of $90,000 and its gross receipts have never exceeded $5,000,000.Tax preference items and positive adjustments total $70,000.Its regular tax liability is $15,450.The alternative minimum tax is

C corporations can choose between the cash-basis and accrual-basis methods of accounting.

Slimtin Corporation has $400,000 of regular taxable income.It has depreciation adjustments of $100,000 (MACRS depreciation in excess of 150% declining balance method),and its adjusted current earnings is $600,000. Part A-Calculate Slimtin's AMT liability. Part B-Slimtin has a $41,000 AMT credit carryover from last year.How much,if any,can be applied this year?

A controlled group of corporations must apportion the lower tax rates among the group members as if only one corporation existed.

Ron transfers assets with a $100,000 FMV (basis $60,000)and $70,000 of business-related liabilities to a corporation in exchange for 100% of the corporation's stock with a FMV of $30,000.The corporation assumes the $70,000 mortgage.The transfer qualifies under Sec.351.What is the adjusted basis of the stock received?

Janice transfers land and a building with a $180,000 adjusted basis and a $200,000 FMV to Optimum Corporation in exchange for 100% of its stock in a transaction qualifying under Sec.351.Shortly before the transfer,Janice obtains a $140,000 mortgage on the property and uses the funds to pay off personal debts.The corporation then assumes the $140,000 mortgage and issues stock worth $60,000.The mortgage assumption lacks business purpose and is intended to place cash in Janice's hands. a.What is the gain realized by Janice? b.What is the gain recognized by Janice? c.What is the basis of the stock received by Janice? d.What is Optimum's basis in the land and building?

Corporate charitable contributions are limited in any given year to 50% of taxable income.

Pursuant to a complete liquidation,Southern Electric Corporation distributes the following assets to its shareholders: Inventory: $15,000 basis,$20,000 FMV Land held as an investment: $10,000 basis,$40,000 FMV Marketable securities: $35,000 basis; $30,000 FMV What are the tax consequences to Southern Electric Corporation?

Musketeer Corporation has the following income and expense items during the current year: The allowed dividends-received deduction is

Bob transfers assets with a $100,000 FMV (basis $60,000)and $70,000 of business-related liabilities to a corporation in exchange for 100% of the corporation's stock with a FMV of $30,000.The corporation assumes the $70,000 mortgage.The transfer qualifies under Sec.351.What is Bob's gain recognized on the transfer?

Individuals Julie and Brandon form JB Corporation.Julie transfers cash of $425,000 in exchange for 50% of the stock of the JB Corporation worth $410,000 and a $15,000 note.Brandon transfers equipment with a $390,000 adjusted basis and a $425,000 FMV for 50% of the stock worth $410,000 and a note of the JB Corporation valued at $15,000.Brandon's basis in the stock received is

Hazel Corporation reported the following results for the current year: Taxable income before the dividends-received deduction What is the amount of the taxable income for the current year and what is the amount of the charitable contributions carryforward to next year?

DEF Corporation and MNO Corporation are both C corporations.To date,DEF has earned $100,000 of taxable income,and MNO has earned $1,000,000.Each corporation expects to earn another $100,000 of taxable income before year-end.DEF will pay more tax on its incremental $100,000 of taxable income than will MNO.

Topper Corporation makes a liquidating distribution of land to its sole shareholder Tonya.Topper purchased the land several years ago for $150,000,and the land was recently appraised at $120,000 of value.Tonya purchased her stock three years ago for $65,000.What is the amount of gains or losses recognized by Topper Corporation and Tonya?

A corporation's regular taxable income for the preceding three years averages $7.499 million.The AMT does not apply because of the exception for small corporations.

A closely held corporation will generally prefer to pay higher salary and lower dividends to shareholders who are employed in the business.