Exam 16: Corporations

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

A manufacturing corporation is owned equally by 10 unrelated individuals.Its taxable income this year is $100,000 and its regular federal income tax liability is $22,250.The company claims a $15,000 dividends-received deduction and pays $25,000 dividends to its shareholders.The corporation had accumulated earnings and profits of $220,000 at the end of the preceding year.The company's reasonable needs of the business at the end of the year is $240,000.What is the amount of the accumulated earnings tax?

How does the treatment of a liquidation of a subsidiary into its parent corporation differ from the general rule?

Concepts Corporation reported the following results for the current year: Taxable income from operations does not include the dividend income or the contributions.The dividend income is from minor investments in U.S.publicly traded stocks.Calculate Concept Corporation's taxable income and any carryovers that may be generated.

Unused charitable contributions of a corporation are carried forward ten years.

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

Tara transfers land with a $690,000 adjusted basis and a $700,000 FMV to a corporation in a Sec.351 transfer.Immediately after the transfer,Tara owns 100% of the corporation-stock with a FMV of $615,000.In addition,$85,000 of business-related liabilities are assumed by the corporation with respect to the transfer.No other property is transferred.Tara's recognized gain on the transfer is

Additional capital may be obtained by a corporation by issuing debt securities or equity securities.What advantages result from issuing debt in the capital structure?

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 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.

If a corporation owns less than 20% of the stock of the distributing corporation,the dividends-received deduction is not allowed for the recipient corporation.

Dozen Corporation is owned equally by twelve unrelated individuals.Its taxable income this year is $100,000 and its regular federal income tax liability is $22,250.The company claims a $20,000 dividends-received deduction and pays $25,000 dividends to its shareholders.The corporation had accumulated earnings and profits of $900,000 at the end of the preceding year.The company has no reasonable needs of the business.The accumulated earnings tax is

Atomic Corporation is enjoying a very profitable year.The board of directors is considering paying either a bonus to the president of the corporation or an extra dividend to the shareholder.Shinil is both the president and the 100% shareholder.Which of the following statements is generally correct with respect to closely held corporations in Atomic's position?

Individuals Opal and Ben form OB Corporation.Opal transfers land and a building with a $550,000 adjusted basis and a $625,000 FMV in exchange for 50% of the stock of the OB Corporation worth $610,000 and a $15,000 note.Ben transfers cash of $625,000 for 50% of the stock worth $610,000 and a note of the OB Corporation valued at $15,000.Opal's basis in the stock received is

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?

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?

Corporations must divide their deductions between deductions for and deductions from AGI.

Oak Corporation manufactures widgets in its factory in Houma,Louisiana.Its taxable income (before the production deduction) is $200,000 and its net income from qualified production activities is $180,000.What is the amount of Oak Corporation's qualified production activities deduction?

The purpose of the accumulated earnings tax is to discourage corporations from retaining excessive amounts of earnings if the funds are invested in assets unrelated to the business needs.

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?