Exam 32: Corporations

In a parent-subsidiary controlled group,the common parent corporation must own more than 50% of the stock of at least one subsidiary corporation.

Individuals Jimmy and Ellen form JE Corporation.Ellen transfers land and a building with a $175,000 adjusted basis and $200,000 FMV in exchange for 50% of the stock of the JE Corporation and a $20,000 note.Jimmy transfers cash of $200,000 for 50% of the stock and a $20,000 note.The transaction meets the terms of Sec.351.The JE stock has a fair market value of $360,000.What is: (a)the amount of Ellen's gain or loss recognized on the transfer? (b)the basis of her stock in JE Corporation? (c)JE Corporation's basis in the land and building (together)transferred by Ellen?

For this tax year,Madison Corporation had taxable income of $80,000 before using any of the net operating loss from the previous year.Madison has never elected to forgo the carryback of its losses since incorporation five years ago.Madison's books and records reflect the following income (loss)since its incorporation. What amount of taxable income (loss)should Madison report on its current tax return?

In a Sec.351 transfer,the corporation takes the shareholder's adjusted basis in the contributed property,regardless of whether the property's FMV is greater than or less than its adjusted basis at the date of contribution.

For purposes of the accumulated earnings tax,reasonable needs of the business include all of the following with the exception of

Various members of Congress favor a reduction in the corporate tax rate to improve competitiveness and have proposed legislation to lower corporate income tax rates.Assume the legislation is enacted,and corporate tax rates are reduced.If a C corporation,which normally generates taxable income of $300,000 or higher and has expectations of higher profits in the future,generates an NOL in the current year,how would you recommend the corporation apply the loss?

Which corporations are required to file a Schedule M-3?

Tester Corporation acquired all of the stock of Socco Corporation five years ago for $400,000.Socco Corporation has been completely liquidated this year,and all of its assets have been transferred to Tester Corporation.Immediately prior to the liquidation,Socco had an adjusted basis in its assets of $560,000,and the assets were worth $700,000. a.How much gain or loss will Socco recognize due to the liquidation? b.How much gain or loss will Tester recognize due to the liquidation? c.What is Tester's adjusted basis in the assets received from Socco?

Indicators of possible exposure of accumulated earning tax risk would include all of the following except