Exam 20: Corporations and Partnerships

Arthur forms Catbird Corporation with the following investment: ​ Arthur receives all of the stock of Catbird. a.What is Arthur's basis in the Catbird Corporation stock? b.What is Catbird Corporation's basis in the marketable securities? The land?

As of January 1, 2017, Amanda, the sole shareholder of Tern (a calendar year S corporation), had a basis in her stock of $50,000. During 2017, 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, 2018?

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?

In return for a 10% interest in the Sapphire Partnership, Lily transfers cash of $50,000 and land (basis of $200,000; fair market value of $300,000). Lily's basis in her Sapphire Partnership interest is $250,000.

If a corporation has no E & P, its shareholders will not have constructive dividends.

Elijah contributes land (basis of $80,000; fair market value of $400,000) for a 20% interest in a partnership. The land is subject to a mortgage of $50,000 which the partnership assumes. As a result of the transfer, Elijah:

Laurie is a 70% shareholder in Martin Ltd., a calendar year S corporation. As of January 1, 2017, Laurie's basis in her stock investment was $400,000. During 2017, she made an additional capital contribution to Martin of $90,000 and also loaned the corporation $80,000. During 2017, Martin Ltd. had an operating loss of $900,000. One of the results of these transactions as to 2017 is that:

In determining a partner's basis in the partnership interest, which of the following reflects a correct adjustment?

Taxpayers who want both limited liability and the passthrough of losses should choose either the Subchapter S or the LLC entity form of doing business.

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 -Tax rates are progressive.

Is there a logical explanation why S corporations are not allowed a dividends received deduction when computing taxable income?

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. -Cannot be a shareholder in another corporation.

The domestic production activities deduction of an S corporation can be passed through to its shareholders.

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 corporation may utilize an NOL carryover from a prior year.

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 -Concept of itemized deductions is not relevant.

During the current year, Goose Corporation (a calendar year, cash basis taxpayer) receives cash dividends as follows: ​ Presuming the taxable income limitation does not apply, Goose Corporation's dividends received deduction for the current year is:

In completing a Schedule M-1 of Form 1120, the Federal income tax per books is added to net income per books to arrive at taxable income. Why?

Skinner Corporation, a calendar year C corporation, had the following transactions during the current year: ​ Skinner's taxable income (or NOL) for the current year is:

In comparing C corporations with individuals, which of the following, if any, relate only to individuals?

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. -Cannot have a partnership as a shareholder.