Exam 15: Corporate Taxation

Ramona is a 50% shareholder in a Subchapter S corporation. At the beginning of the year, her basis in the stock was $100,000. The corporation reported total ordinary income of $60,000 and total dividend income of $20,000. The corporation also borrowed an additional $20,000 from a local bank. What is the basis of Ramona's stock at the end of the year?

Alabaster Company is a Subchapter S corporation. It properly reported net income of $250,000 for financial statement purposes. It had net capital gains of $60,000 and charitable contributions of $20,000. What is the ordinary business income (loss) of Alabaster Company that will be reported to its shareholders on Schedule K-1?

A corporation can elect to be taxed as a Subchapter S corporation if it meets certain requirements including that it has 100 or fewer shareholders, all of whom are individuals, estates, and certain trusts.

A parent-subsidiary group is one in which a common parent corporation owns, directly or indirectly, at least 80% of one or more other corporations.

When reconciling from book income to taxable income on Schedule M-1, which of the following statements is correct?

Which of the following statements is correct with respect to the formation of a corporation?

C corporations with average annual gross receipts over $5 million must use the accrual basis of accounting.

A corporation with a net capital gain will be taxed on that gain at preferential tax rates, similar to an individual.

A capital loss carryforward will create a reconciling item on Schedule M-1, but a capital loss carryback will not.

When a corporation is formed, if the transferors own 80% or more of the corporation immediately after the exchange, then the transaction is, generally, tax-free.

STU Corporation has taxable income before DRD of $27,000 that includes a dividend of $30,000 from a large publicly-traded domestic corporation. What is the taxable income of STU Corporation?

Orange Corporation was formed in 2013. In that year it had a net capital loss of $2,000. In 2014, it had a net capital gain of $5,000. In 2015, the company reported a net capital loss of $9,000. What is the amount of capital loss carryforward to 2016, if any?

Schedule L is prepared using the accounting method the corporation uses to keep its financial accounting records.

The corporate alternative minimum tax exemption amount is $150,000.

Which of the following statements is incorrect with respect to parent-subsidiary corporations?

Initially, corporations with average annual gross receipts for the last three years of $5 million or less are not subject to the corporate AMT rules.

Shauntae receives a distribution from a corporation in complete liquidation of his ownership interest. Shauntae could report a capital gain, but not a capital loss, from the distribution.

Which of the following statements is incorrect?

In 2012, the first year of its existence, Chartreuse Corporation had a net capital loss of $3,000. In 2013 and 2014, it had net capital gains of $5,000 and $8,000, respectively. In 2015, the company reported a net capital loss of $12,000. What is the amount of capital loss carryforward to 2016?

Which of the following statements is correct?