Exam 20: Corporations and Partnerships

Auburn Corporation owns 6% of the stock in Cerulean Corporation.During the year,Auburn received cash dividends of $800,000 from this investment.Determine Auburn Corporation's dividends received deduction based on the following assumptions: a.Taxable income before the deduction is $960,000. b.Taxable income before the deduction is $720,000. c.Taxable income before the deduction is $480,000.

A shareholder's basis in property received as a dividend is its fair market value on the date of the distribution.

Kestrel is a C corporation that is engaged solely in buying and reselling goods it acquires from Skimmer,another C corporation.Although Kestrel conducts no manufacturing activity and is exclusively involved in a marketing function,it may still be entitled to a domestic production activities deduction (DPAD).Explain how this could be possible.

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. -The tax return is due on or before the fifteenth day of the fourth month following the end of the tax year.

In 2015,Creeper Corporation had a $4,000 net long-term capital loss which it could not carry back.For 2016,it had the following capital transactions: Long-term capital gain $2,000 Short-term capital gain 3,000 ​ As a result of these transactions,for 2016 Creeper has a:

Corporate taxpayers lose the benefits of lower tax brackets and the rates cease to be progressive once taxable income reaches a certain level.Explain this statement.

Unlike regular dividends,constructive dividends need not be distributed to a corporation's shareholders on a pro rata basis.

As of January 1,2016,Amanda,the sole shareholder of Tern (a calendar year S corporation),had a basis in her stock of $50,000.During 2016,Tern had a net operating loss of $100,000 and distributed a $70,000 dividend to Amanda.What is Amanda's basis in her Tern stock as of January 1,2017?

For corporations and individuals,net short-term capital gains are taxed at ordinary income rates.

On January 1,2016,Copper Corporation (a calendar year S corporation for many years)became a C corporation.A possible reason for this change in status is:

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 -All of the appreciation on ordinary income property donated to charity can be claimed as a deduction.

A corporation's election to forego a net operating loss carryback is irrevocable and cannot later be changed.

In order to voluntarily revoke an S election,all of the shareholders must consent to the revocation.

Crimson Corporation owns stock in other C corporations as follows: 90% of Maize;30% of Mocha;and 10% of Saffron.During the current year,it receives dividends from the corporations as follows: $80,000 from Maize;$60,000 from Mocha;and $100,000 from Saffron.Presuming no taxable income limitations,what is Crimson's dividends received deduction?

If a shareholder in an S corporation makes a loan to the corporation,this increases the basis in his stock investment.

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 -Could be exempt from the AMT.

Describe how a Subchapter S election can be lost. ​ a.Voluntarily. b.Involuntarily.

Jenny contributes land (adjusted basis of $300,000;fair market value of $280,000)and cash of $40,000 to the newly formed Green Partnership.Green will have a basis in the land of $280,000.

In determining the NOL of a C corporation,fewer adjustments are necessary than in the case of individual taxpayers.Why is this the case?

For 2016,Plover Corporation,a calendar year taxpayer,had net income per books (after tax)of $75,250.Other transactions having a tax effect include: Income tax liability $22,250 Interest on tax-exempt bonds 10,000 Excess capital losses 7,500 Excess charitable contributions 5,000 (not deductible due to the 10% limit) What is Plover Corporation's taxable income for 2016?