Exam 20: Corporations and Partnerships

Using the legend provided, classify each statement accordingly. a.Applies only to the income taxation of C corporations. b.Applies only to the income taxation of S corporations. c.Applies to both the income taxation of C corporations and S corporations. d.Applies to neither the income taxation of C corporations nor of S corporations. -A deduction for organizational expenditures is allowed.

In computing the NOL of a corporation,the dividends received deduction cannot be claimed.

Which of the following statements,if any,is characteristic of constructive dividends?

In order to obtain limited liability,a sole proprietor incorporates his business.Under the check-the-box Regulations,the entity can elect to be treated as a partnership.

Using the legend provided, classify each statement accordingly. a.Applies only to the income taxation of C corporations. b.Applies only to the income taxation of S corporations. c.Applies to both the income taxation of C corporations and S corporations. d.Applies to neither the income taxation of C corporations nor of S corporations. -Upon its formation,§ 351 (transfers to controlled corporations)can apply.

Guaranteed payments have no effect on the basis of a partner's interest in the partnership.

Schedule M-2 of Form 1120 reconciles unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at year-end.

Laurie is a 70% shareholder in Martin Ltd. ,a calendar year S corporation.As of January 1,2016,Laurie's basis in her stock investment was $400,000.During 2016,she made an additional capital contribution to Martin of $90,000 and also loaned the corporation $80,000.During 2016,Martin Ltd.had an operating loss of $900,000.One of the results of these transactions as to 2016 is that:

Spencer owns 50% of the stock of Crossbill Corporation,a calendar year taxpayer that has elected Subchapter S status.As of January 1,2016,Spencer's basis in the stock is $40,000.Crossbill has an operating loss of $100,000 for 2016 and taxable income of $60,000 for 2017. a.What should Spencer report for 2016? b.What should Spencer report for 2017? c.What is Spencer's basis in Crossbill Corporation stock as of January 1,2017? As of January 1,2018?

Which,if any,of the following transactions incurred by an S corporation is not a separately stated item?

Using the legend provided, classify each statement accordingly. a.Applies only to the income taxation of individuals b.Applies only to the income taxation of C corporations c.Applies to both the income taxation of individuals and of C corporations d.Applies to neither the income taxation of individuals nor of C corporations -Excess long-term capital losses are carried forward as short-term capital losses.

Which,if any,of the following rules relate only to the income taxation of C corporations?

In the current year,Rose Corporation,a calendar year corporation,has taxable income from operations of $95,000 and a long-term capital gain of $10,000. a.What is Rose Corporation's Federal income tax liability? b.What if Rose Corporation is a personal service corporation?

The foreign tax credit is available only to individuals and not to C corporations.

Using the legend provided, classify each statement accordingly. a.Applies only to the income taxation of C corporations. b.Applies only to the income taxation of S corporations. c.Applies to both the income taxation of C corporations and S corporations. d.Applies to neither the income taxation of C corporations nor of S corporations. -A shareholder cannot have a negative basis in his or her stock investment.

Mel,Fred,and Mary form Canary Corporation.Mel and Fred each contribute cash of $250,000,while Mary contributes land (basis of $100,000;fair market value of $300,000).Each transferor receives one-third of Canary's shares,and Mary also receives $50,000 in cash.Which,if any,of the following choices is a correct result of the incorporation?

Under the check-the-box Regulations,a multi-owner entity that defaults (i.e. ,makes no election)will be taxed as a partnership.

Partnerships are not considered to be separate taxable entities and,consequently,are not taxed at the entity level.

Partners can carry over partnership losses that exceed the basis in their partnership interests.

A C corporation donates inventory (basis of $9,000,fair market value of $10,000)to charity.Under certain circumstances,it can claim a charitable contribution deduction of $9,500.