Exam 20: Corporations and Partnerships

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?

For income tax purposes, excess capital losses of individuals and corporations are treated in the same manner.

The Schedule M-1 to Form 1120 starts with taxable income and, after making various negative and positive adjustments, ends up with net income per books.

Examples of separately stated items of an S corporation include tax-exempt interest.

Murrelet Corporation is a calendar year taxpayer that holds S status. For the current year, it had the following transactions: ​ a.What is Murrelet Corporation's taxable income? b.What are the separately stated items?

In determining which organizational expenditures can be amortized, it is the year incurred (and not paid) that controls if the corporation uses the cash method of accounting.

If a corporation does not choose to amortize its organizational expenditures, such expenses can never be deducted.

For 2017, Plover Corporation, a calendar year taxpayer, had net income per books (after tax) of $75,250. Other transactions having a tax effect include: What is Plover Corporation's taxable income for 2017?

Sarah, a sole shareholder, rents property to her corporation. The rent income she receives from the lease is a constructive dividend to Sarah.

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 -Interest on municipal bonds is excluded from gross income.

The rules dealing with the recapture of depreciation on real estate are different for corporations than for individuals. Explain.

Emerald Corporation and Gold Corporation each own 500 shares of IBM Corporation common stock and each receives the same amount of cash dividends on their stock investment. The dividends received deduction each corporation can claim will be the same.

Starling Corporation is a calendar year S corporation. For the current year, Starling had the following transactions: ​ a.What is Starling Corporation's taxable income? b.What are the separately stated items?

The Carson brothers plan to open an auto repair facility. They anticipate losses in the early years of the business and are concerned about potential liability. What type of business entity should they choose?

Jacob is a shareholder in Robin Corporation, an S corporation. Jacob's share of Robin's activities for the current year is a short-term capital gain of $80,000 and an operating loss of $50,000. As a result of these transactions, Jacob should increase his basis in the Robin stock by $30,000.

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 capital losses can be carried over indefinitely.

Under certain circumstances, an S corporation can have more than 100 shareholders.

Sophia and William form the Bobwhite Corporation with the following investments: ​ Each person is issued one-half of Bobwhite's stock and, in addition, William receives cash of $50,000. ​ a.How much gain, if any, must William recognize and what basis does he have in the Bobwhite stock? b.What is Bobwhite's basis in the land?