Exam 20: Corporations and Partnerships

The taxable income (or loss) of an S corporation is allocated to each shareholder on a per-share and per-day of stock ownership basis.

Silver Corporation has held an S election since its formation five years ago. Which, if any, of the following will cause Silver to lose its election?

Satisfying the definition of a small business corporation is no longer necessary once the S election is initially made.

An individual with a fiscal year of July 1-June 30 has a due date for filing its Federal income tax return of October 15.

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.

A partner's basis in the partnership interest is decreased by his or her share of the capital losses incurred by the partnership.

Although the corporate income tax is progressive, the lower brackets are phased out at higher taxable income levels.

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.

Which of the following, if any, correctly describe the status or nature of limited liability companies?

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

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 -A net short-term capital loss can be used to offset a net long-term capital gain.

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?

In the formation of a corporation under § 351, the shareholder's basis in the stock received is decreased by loss recognized and boot received.

Citron Company is a wholesale distributor of children's clothing. During the year, it donates clothes (cost of $60,000; retail value of $100,000) to Clothes for Needy (a qualified charitable organization). Disregarding percentage limitations, Citron's charitable contribution deduction is:

If a C corporation has taxable income in excess of $18,333,333, the corporate tax rate is 35% on all of its taxable income.

When forming a corporation under § 351, recognized gain is the lesser of realized gain or the amount of boot received.

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.

Blue Corporation and Red Corporation are unrelated C corporations and hold as investments the same number of shares of stock in BP Corporation. As such, they each receive an equal amount of dividends from BP Corporation. If each claims a different dividends received deduction, what could cause the variation?

As of January 1, 2017, Crimson Corporation, a calendar year C corporation, has a deficit of $300,000 in accumulated E & P. For 2017, it has current E & P of $100,000, and during the year distributes $120,000 as a dividend to the shareholders. Comment on the following assumptions. a.The shareholders recognize no dividend income as Crimson still has negative E & P for the year of the distribution [($300,000) beginning deficit + $100,000 current E & P = ($200,000) ending deficit]. b.Crimson's accumulated E & P on January 1, 2018, is ($320,000).

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.