Question 1

A shareholder's basis in stock received in a Sec.351 transaction is

Accepted Answer

A) increased by the gain recognized by the corporation. 
B) decreased by the gain recognized by the transferor. 
C) decreased by liabilities assumed by the corporation. 
D) increased by the FMV of boot received from the corporation. 
A) increased by the gain recognized by the corporation. 
B) decreased by the gain recognized by the transferor. 
C) decreased by liabilities assumed by the corporation. 
D) increased by the FMV of boot received from the corporation.

Question 2

Martin operates a law practice as a sole proprietorship using the cash method of accounting.Martin incorporates the law practice and transfers the following items to a new,solely owned corporation.
 
Martin must recognize a gain of ________ and has a stock basis of ________:

Accepted Answer

A) $0;$30,000 
B) $0;$40,000 
C) $20,000;$30,000 
D) $20,000;$40,000 
A) $0;$30,000 
B) $0;$40,000 
C) $20,000;$30,000 
D) $20,000;$40,000

Question 3

Identify which of the following statements is true.

Accepted Answer

A) The exchange of stock for services rendered is not a taxable transaction. 
B) The repeal of Sec.351 would result in more existing businesses being incorporated. 
C) Section 351 was enacted to allow taxpayers to incorporate without incurring adverse tax consequences. 
D) All of the above are false. 
A) The exchange of stock for services rendered is not a taxable transaction. 
B) The repeal of Sec.351 would result in more existing businesses being incorporated. 
C) Section 351 was enacted to allow taxpayers to incorporate without incurring adverse tax consequences. 
D) All of the above are false.

Question 4

Silvia transfers to Leaf Corporation a machine she had purchased a year ago for $50,000.The machine has a $40,000 adjusted basis and an $55,000 FMV on the transfer date.$10,000 in depreciation was claimed by Silvia prior to the transfer.Silvia receives all 1,000 shares of Leaf Corporation stock worth $50,000 and a two-year note with a $5,000 FMV.What is the amount and character of the recognized gain or loss?

Accepted Answer

A) $15,000 ordinary income 
B) $15,000 capital gain 
C) $5,000 ordinary income 
D) $5,000 capital gain 
A) $15,000 ordinary income 
B) $15,000 capital gain 
C) $5,000 ordinary income 
D) $5,000 capital gain

Question 5

Identify which of the following statements is true.

Accepted Answer

A) C corporation operating losses are deductible by the individual shareholders. 
B) If a C corporation does not distribute its income to its shareholders annually,double taxation cannot occur. 
C) Capital losses incurred by a C corporation can be used to offset the corporation's ordinary income. 
D) All of the above are false. 
A) C corporation operating losses are deductible by the individual shareholders. 
B) If a C corporation does not distribute its income to its shareholders annually,double taxation cannot occur. 
C) Capital losses incurred by a C corporation can be used to offset the corporation's ordinary income. 
D) All of the above are false.

Question 6

What are the tax consequences to Whitney who owns 50% of Museum Corporation,a qualifying S Corporation that is a calendar-year entity,if Museum Corporation reports $60,000 of taxable income? How would your answer change if Museum Corporation reported a $40,000 loss?

Accepted Answer

Whitney must pay taxes on $30,000,his 50

Question 7

Chris transfers land with a basis of $40,000 to Webb Corporation in exchange for 100% of Webb's stock.At the date of the transfer,the land had a $30,000 fair market value.Absent an election by Chris,Webb's basis in the land is

Accepted Answer

A) $30,000. 
B) $35,000. 
C) $40,000. 
D) none of the above 
A) $30,000. 
B) $35,000. 
C) $40,000. 
D) none of the above

Question 8

The transferor's basis for any noncash boot property received in a Sec.351 transaction is the boot's FMV reduced by any unrecognized gain.

Accepted Answer

A) True 
 B)False

Question 9

Identify which of the following statements is true.

Accepted Answer

A) The definition of stock under Sec.351 includes stock rights and warrants. 
B) The receipt of property other than stock by the transferor will trigger the recognition of gain or loss under Sec.351. 
C) The character of the gain recognized by the transferor when boot is received in a Sec.351 transaction depends on the type of boot received. 
D) All of the above are false. 
A) The definition of stock under Sec.351 includes stock rights and warrants. 
B) The receipt of property other than stock by the transferor will trigger the recognition of gain or loss under Sec.351. 
C) The character of the gain recognized by the transferor when boot is received in a Sec.351 transaction depends on the type of boot received. 
D) All of the above are false.

Question 10

Michael contributes equipment with a $25,000 adjusted basis and a $40,000 FMV to Miller Corporation for 25 of its 50 shares of stock.His son,Michael Jr. ,contributes $10,000 cash for the remaining 25 Miller shares.What tax issues should Michael and his son consider with respect to the stock acquisitions?

Accepted Answer

•Does the property transfer meet the Sec

Question 11

Identify which of the following statements is false.

Accepted Answer

A) A solely owned corporation is a sole proprietorship. 
B) A sole proprietorship is a separate taxable entity. 
C) A sole proprietor is considered to be an employee of the business. 
D) All of the above are false. 
A) A solely owned corporation is a sole proprietorship. 
B) A sole proprietorship is a separate taxable entity. 
C) A sole proprietor is considered to be an employee of the business. 
D) All of the above are false.

Question 12

Several years ago,John acquired 200 shares of Jersey Corporation stock directly from the corporation for $150,000 in cash.This year,he sold the stock to Bill for $85,000.What tax issues should John consider with respect to the stock sale?

Accepted Answer

•Was the stock sold to a related party (

Question 13

Identify which of the following statements is true.

Accepted Answer

A) The transferor must recapture depreciation when exchanging Sec.1245 property in all transactions coming under Sec.351. 
B) A corporation receiving property in a Sec.351 exchange can select any MACRS depreciation method for the asset. 
C) When depreciable property is transferred to a corporation in a Sec.351 exchange in which no gain is recognized,the corporation must continue to use the transferor's depreciation method and recovery period for the property. 
D) All of the above are false. 
A) The transferor must recapture depreciation when exchanging Sec.1245 property in all transactions coming under Sec.351. 
B) A corporation receiving property in a Sec.351 exchange can select any MACRS depreciation method for the asset. 
C) When depreciable property is transferred to a corporation in a Sec.351 exchange in which no gain is recognized,the corporation must continue to use the transferor's depreciation method and recovery period for the property. 
D) All of the above are false.

Question 14

A medical doctor incorporates her medical practice,which is operated as a sole proprietorship.The proprietorship uses the cash method of accounting.Among the assets contributed to the new corporation are unrealized receivables worth $40,000.The receivables are collected by the corporation.Which of the following statements is correct?

Accepted Answer

A) The $40,000 of receivables is included as ordinary income on the doctor's personal income tax return when collected by the corporation. 
B) The doctor must include the $40,000 as ordinary income in her personal income tax return at the time of incorporation. 
C) The $40,000 of receivables is included as ordinary income in the corporation's income tax return at the time of incorporation. 
D) The $40,000 of receivables is included as ordinary income in the corporation's income tax return when collected. 
A) The $40,000 of receivables is included as ordinary income on the doctor's personal income tax return when collected by the corporation. 
B) The doctor must include the $40,000 as ordinary income in her personal income tax return at the time of incorporation. 
C) The $40,000 of receivables is included as ordinary income in the corporation's income tax return at the time of incorporation. 
D) The $40,000 of receivables is included as ordinary income in the corporation's income tax return when collected.

Question 15

Ra Corporation issues a twenty-year obligation at its $1,000 face amount.Rames purchases the obligation for $1,000 on the issue date.Due to a decline in interest rates,Ra calls the obligation by paying $1,010 to each of the holders of the twenty-year obligations.What is the tax treatment of the $1,010 by Ra and Rames?

Accepted Answer

Ra will recognize a $10 capita

Question 16

Cherie transfers two assets to a newly-created corporation.The first asset has an adjusted basis of $40,000 and a FMV of $50,000.The second asset has an adjusted basis of $35,000 and a FMV of $25,000.Cherie receives stock with FMV of $66,000 and $9,000 cash.Cherie must recognize a gain of

Accepted Answer

A) $10,000. 
B) $6,000. 
C) $5,000. 
D) $4,000. 
A) $10,000. 
B) $6,000. 
C) $5,000. 
D) $4,000.

Question 17

Which of the following statements is true?

Accepted Answer

A) Shareholders in a C corporation can use C corporation losses to offset shareholder income from other sources. 
B) C corporation losses remain in the C corporation and can offset capital gain income from other years. 
C) C corporation shareholders are taxed based on their proportionate share of income. 
D) Distributions of C corporation income are not taxable. 
A) Shareholders in a C corporation can use C corporation losses to offset shareholder income from other sources. 
B) C corporation losses remain in the C corporation and can offset capital gain income from other years. 
C) C corporation shareholders are taxed based on their proportionate share of income. 
D) Distributions of C corporation income are not taxable.

Question 18

Yolanda transfers land,a capital asset,having a $70,000 adjusted basis and an $125,000 FMV plus $10,000 cash to Jazz Corporation in exchange for all its stock.Jazz Corporation assumes the $100,000 mortgage on the land.The mortgage assumption has no tax avoidance purpose and has the requisite business purpose.What is the amount of Yolanda's realized gain or loss? How much is recognized and what is its character? What is Yolanda's basis in the Jazz stock?

Accepted Answer

Yolanda has a realized gain of $55,000 (

Question 19

Max transfers the following properties to a newly created corporation for $90,000 of stock and $10,000 cash in a transaction that qualifies under Sec.351.
 
Max's recognized gain is

Accepted Answer

A) $3,000. 
B) $5,000. 
C) $7,000. 
D) $10,000. 
A) $3,000. 
B) $5,000. 
C) $7,000. 
D) $10,000.

Question 20

Section 351 applies to an exchange if the contributing shareholders own more than 50% of a corporation's stock after the transfer.

Accepted Answer

A) True 
 B)False

A shareholder's basis in stock received in a Sec.351 transaction is

Martin operates a law practice as a sole proprietorship using the cash method of accounting.Martin incorporates the law practice and transfers the following items to a new,solely owned corporation. Martin must recognize a gain of and has a stock basis of :

Identify which of the following statements is true.

Identify which of the following statements is true.

What are the tax consequences to Whitney who owns 50% of Museum Corporation,a qualifying S Corporation that is a calendar-year entity,if Museum Corporation reports $60,000 of taxable income? How would your answer change if Museum Corporation reported a $40,000 loss?

Chris transfers land with a basis of $40,000 to Webb Corporation in exchange for 100% of Webb's stock.At the date of the transfer,the land had a $30,000 fair market value.Absent an election by Chris,Webb's basis in the land is

The transferor's basis for any noncash boot property received in a Sec.351 transaction is the boot's FMV reduced by any unrecognized gain.

Identify which of the following statements is true.

Identify which of the following statements is false.

Several years ago,John acquired 200 shares of Jersey Corporation stock directly from the corporation for $150,000 in cash.This year,he sold the stock to Bill for $85,000.What tax issues should John consider with respect to the stock sale?

Identify which of the following statements is true.

Cherie transfers two assets to a newly-created corporation.The first asset has an adjusted basis of $40,000 and a FMV of $50,000.The second asset has an adjusted basis of $35,000 and a FMV of $25,000.Cherie receives stock with FMV of $66,000 and $9,000 cash.Cherie must recognize a gain of

Which of the following statements is true?

Max transfers the following properties to a newly created corporation for $90,000 of stock and $10,000 cash in a transaction that qualifies under Sec.351. Max's recognized gain is

Section 351 applies to an exchange if the contributing shareholders own more than 50% of a corporation's stock after the transfer.

Tax Research

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters

Exam 2: Corporate Formations and Capital Structure

A shareholder's basis in stock received in a Sec.351 transaction is

Martin operates a law practice as a sole proprietorship using the cash method of accounting.Martin incorporates the law practice and transfers the following items to a new,solely owned corporation. Martin must recognize a gain of ________ and has a stock basis of ________:

Identify which of the following statements is true.

Identify which of the following statements is true.

What are the tax consequences to Whitney who owns 50% of Museum Corporation,a qualifying S Corporation that is a calendar-year entity,if Museum Corporation reports $60,000 of taxable income? How would your answer change if Museum Corporation reported a $40,000 loss?

Chris transfers land with a basis of $40,000 to Webb Corporation in exchange for 100% of Webb's stock.At the date of the transfer,the land had a $30,000 fair market value.Absent an election by Chris,Webb's basis in the land is

The transferor's basis for any noncash boot property received in a Sec.351 transaction is the boot's FMV reduced by any unrecognized gain.

Identify which of the following statements is true.

Identify which of the following statements is false.

Several years ago,John acquired 200 shares of Jersey Corporation stock directly from the corporation for $150,000 in cash.This year,he sold the stock to Bill for $85,000.What tax issues should John consider with respect to the stock sale?

Identify which of the following statements is true.

Cherie transfers two assets to a newly-created corporation.The first asset has an adjusted basis of $40,000 and a FMV of $50,000.The second asset has an adjusted basis of $35,000 and a FMV of $25,000.Cherie receives stock with FMV of $66,000 and $9,000 cash.Cherie must recognize a gain of

Which of the following statements is true?

Max transfers the following properties to a newly created corporation for $90,000 of stock and $10,000 cash in a transaction that qualifies under Sec.351. Max's recognized gain is

Section 351 applies to an exchange if the contributing shareholders own more than 50% of a corporation's stock after the transfer.

Tax Research

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters

Martin operates a law practice as a sole proprietorship using the cash method of accounting.Martin incorporates the law practice and transfers the following items to a new,solely owned corporation. Martin must recognize a gain of and has a stock basis of :