Question 1

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

Accepted Answer

A) $120,000. 
B) $168,000. 
C) $192,000. 
D) $240,000. 
A) $120,000. 
B) $168,000. 
C) $192,000. 
D) $240,000.

Question 2

Individuals Gayle and Marcus form GM Corporation.Gayle transfers land and a building with a $750,000 adjusted basis and a $830,000 FMV in exchange for 50% of the stock of the GM Corporation worth $800,000 and a $30,000 note.Marcus transfers cash of $830,000 for 50% of the stock worth $800,000 and a note of the GM Corporation valued at $30,000.The basis of the land and building to GM Corporation is

Accepted Answer

A) $750,000. 
B) $780,000. 
C) $830,000. 
D) $860,000. 
A) $750,000. 
B) $780,000. 
C) $830,000. 
D) $860,000.

Question 3

By calculating its depreciation on personal property using the most accelerated method available,a corporation increases the likelihood that it will be subject to the alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 4

Mason Corporation is a personal service corporation in the legal field.Mason Corporation has taxable income of $100,000.Mason Corporation's tax is

Accepted Answer

A) $15,000. 
B) $34,000. 
C) $35,000. 
D) $22,250. 
A) $15,000. 
B) $34,000. 
C) $35,000. 
D) $22,250.

Question 5

A corporation earns $500,000 of current E&P and has an accumulated deficit of $300,000.The corporation pays a $350,000 distribution to its shareholders this year.$200,000 of the distribution will be taxed as a dividend.

Accepted Answer

A) True 
 B)False

Question 6

A calendar-year corporation has a $15,000 current E&P deficit and a $40,000 positive accumulated E&P balance.The shareholders of the corporation have a total basis in outstanding shares of $30,000.A $75,000 distribution is made to the shareholders on the last day of the year.The tax results to the shareholders will be

Accepted Answer

A) dividend income of $25,000,a tax-free return of capital of $30,000,and capital gain of $20,000. 
B) dividend income of $0,a tax-free return of capital of $30,000,and capital gain of $45,000. 
C) dividend income of $25,000,a tax-free return of capital of $5,000,and capital gain of $45,000. 
D) dividend income of $40,000,a tax-free return of capital of $30,000,and capital gain of $5,000. 
A) dividend income of $25,000,a tax-free return of capital of $30,000,and capital gain of $20,000. 
B) dividend income of $0,a tax-free return of capital of $30,000,and capital gain of $45,000. 
C) dividend income of $25,000,a tax-free return of capital of $5,000,and capital gain of $45,000. 
D) dividend income of $40,000,a tax-free return of capital of $30,000,and capital gain of $5,000.

Question 7

A corporation has the following capital gains and losses during the current year:   The tax result to the corporation is

Accepted Answer

A) deduct $3,000 of the STCL currently; carry forward the remaining $2,000 STCL and $6,000 LTCL. 
B) deduct $5,000 STCL and $6,000 LTCL. 
C) deduct nothing currently; carry back the $5,000 STCL and $6,000 LTCL for three years and carry forward for 5 years,if necessary. 
D) deduct nothing currently; carry back the $11,000 STCL for three years and carry forward for 5 years,if necessary. 
A) deduct $3,000 of the STCL currently; carry forward the remaining $2,000 STCL and $6,000 LTCL. 
B) deduct $5,000 STCL and $6,000 LTCL. 
C) deduct nothing currently; carry back the $5,000 STCL and $6,000 LTCL for three years and carry forward for 5 years,if necessary. 
D) deduct nothing currently; carry back the $11,000 STCL for three years and carry forward for 5 years,if necessary.

Question 8

Ten years ago Finn Corporation formed a new 100 percent owned subsidiary,Wing Corporation,with a $500,000 investment.Wing Corporation is completely liquidated this year,with all assets distributed to Finn Corporation.As of the liquidation date,Wing has a basis in its assets of $350,000,and the assets are valued at $550,000.What is the gain or loss recognized by Finn Corporation due to the liquidating distribution,and what is Finn Corporation's basis in the assets received from Wing Corporation?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 9

Louisiana Land Corporation reported the following results for the current year:   What is the amount of the taxable income for the current year?

Accepted Answer

A) $240,000 
B) $268,000 
C) $294,000 
D) $300,000 
A) $240,000 
B) $268,000 
C) $294,000 
D) $300,000

Question 10

Corporations that are members of a parent-subsidiary affiliated group may file a consolidated return if the proper election is made.

Accepted Answer

A) True 
 B)False

Question 11

Individuals Bert and Tariq form Shark Corporation.Bert transfers equipment with a $290,000 adjusted basis and a $335,000 FMV for 50% of the stock worth $310,000 and a note of Shark Corporation valued at $25,000.Tariq transfers cash of $335,000 in exchange for 50% of the stock of Shark Corporation worth $310,000 and a $25,000 note.Bert's recognized gain is

Accepted Answer

A) $0. 
B) $20,000. 
C) $25,000. 
D) $45,000. 
A) $0. 
B) $20,000. 
C) $25,000. 
D) $45,000.

Question 12

If a corporation's charitable contributions exceed the deduction limitation in a particular year,the excess

Accepted Answer

A) is not deductible in any future year. 
B) becomes a carryforward to a maximum of five succeeding years. 
C) may be carried back to the third preceding year. 
D) is carried over indefinitely. 
A) is not deductible in any future year. 
B) becomes a carryforward to a maximum of five succeeding years. 
C) may be carried back to the third preceding year. 
D) is carried over indefinitely.

Question 13

Montrose Corporation is classified as a personal holding company.It is almost year-end.The company's taxable income and regular federal income tax liability are expected to be $100,000 and $22,250,respectively.The company will claim a $20,000 dividends-received deduction and earlier in the year paid $25,000 of dividends to its shareholders.How much in additional dividends must be paid to shareholders in order to avoid the personal holding company tax?

Accepted Answer

A) $92,750 
B) $52,750 
C) $72,750 
D) $97,750 
A) $92,750 
B) $52,750 
C) $72,750 
D) $97,750

Question 14

A corporation is owned 70% by Jones and 30% by Smith.Jones owns 70 shares with a cost of $100 each.Smith owns 30 shares with a cost of $100 per share.The company redeems 20 shares from Jones at a redemption price of $400 per share.No stock is redeemed from Smith.This is not a redemption to pay death taxes,and it is not a partial liquidation.What is the tax impact on Jones?

Accepted Answer

A) capital gain of $6,000 
B) capital gain of $8,000 
C) dividend income of $6,000 
D) dividend income of $8,000 
A) capital gain of $6,000 
B) capital gain of $8,000 
C) dividend income of $6,000 
D) dividend income of $8,000

Question 15

Summer Corporation has the following capital gains and losses during the current year:   The tax result to the corporation is

Accepted Answer

A) $6,000 NSTCG included in gross income. 
B) $6,000 NLTCG included in gross income. 
C) $10,000 NLTCG is included in gross income and $4,000 NSTCL is carried forward to the next year. 
D) $10,000 NLTCG receives long-term capital gain treatment and $4,000 NSTCL included as ordinary loss. 
A) $6,000 NSTCG included in gross income. 
B) $6,000 NLTCG included in gross income. 
C) $10,000 NLTCG is included in gross income and $4,000 NSTCL is carried forward to the next year. 
D) $10,000 NLTCG receives long-term capital gain treatment and $4,000 NSTCL included as ordinary loss.

Question 16

Lafayette Corporation distributes $80,000 in cash along with land having a $40,000 adjusted basis and a $70,000 FMV to its shareholder,Gus.The corporation has accumulated substantial earnings and profits.
a.What are the tax consequences to Lafayette Corporation?
b.What are the tax consequences to the shareholder?
c.What is the shareholder's basis in the land?

Accepted Answer

a.Lafayette Corporation recognizes $30,0

Question 17

The accumulated earnings tax is imposed on all publicly held corporations.

Accepted Answer

A) True 
 B)False

Question 18

A U.S.-based corporation produces cereal in Niagara Falls,NY,and in Niagara Falls,Ontario.The corporation will be allowed the qualified production activities deduction based on all of its production.

Accepted Answer

A) True 
 B)False

Question 19

A family-owned corporation with substantial investment income could be subject to both the accumulated earnings tax and the personal holding company tax.

Accepted Answer

A) True 
 B)False

Question 20

A corporation is owned 70% by Jones and 30% by Smith.Jones owns 70 shares with a cost of $100 each.Smith owns 30 shares with a cost of $100 per share.The company redeems 5 shares from Smith at a redemption price of $400 per share.No stock is redeemed from Jones.This is not a redemption to pay death taxes,and it is not a partial liquidation.What is the tax impact on Smith?

Accepted Answer

A) $2,000 dividend 
B) $2,000 capital gain 
C) $1,500 dividend 
D) $1,500 capital gain 
A) $2,000 dividend 
B) $2,000 capital gain 
C) $1,500 dividend 
D) $1,500 capital gain

Exam 32: Corporations

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

By calculating its depreciation on personal property using the most accelerated method available,a corporation increases the likelihood that it will be subject to the alternative minimum tax.

Mason Corporation is a personal service corporation in the legal field.Mason Corporation has taxable income of $100,000.Mason Corporation's tax is

A corporation earns $500,000 of current E&P and has an accumulated deficit of $300,000.The corporation pays a $350,000 distribution to its shareholders this year.$200,000 of the distribution will be taxed as a dividend.

A corporation has the following capital gains and losses during the current year: The tax result to the corporation is

Louisiana Land Corporation reported the following results for the current year: What is the amount of the taxable income for the current year?

Corporations that are members of a parent-subsidiary affiliated group may file a consolidated return if the proper election is made.

If a corporation's charitable contributions exceed the deduction limitation in a particular year,the excess

Summer Corporation has the following capital gains and losses during the current year: The tax result to the corporation is

The accumulated earnings tax is imposed on all publicly held corporations.

A U.S.-based corporation produces cereal in Niagara Falls,NY,and in Niagara Falls,Ontario.The corporation will be allowed the qualified production activities deduction based on all of its production.

A family-owned corporation with substantial investment income could be subject to both the accumulated earnings tax and the personal holding company tax.

Tax Research

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