Question 1

Once a corporation properly elects to be a Subchapter S corporation, it cannot terminate its election for five years.

Accepted Answer

A) True 
 B)False

Question 2

The maximum marginal corporate tax rate is 35%.

Accepted Answer

A) True 
 B)False

Question 3

To legally operate as a corporation in most states, the incorporators must simply file a corporate federal income tax return.

Accepted Answer

A) True 
 B)False

Question 4

Corporate distributions to shareholders are called dividends.

Accepted Answer

A) True 
 B)False

Question 5

If a corporation has a net capital loss, the loss is carried forward indefinitely.

Accepted Answer

A) True 
 B)False

Question 6

Schedule L is a reconciliation of net income per books to net income per the tax law.

Accepted Answer

A) True 
 B)False

Question 7

Determine the basis of stock in the hands of the shareholder, the basis to the corporation of the contributed property, and the gain, if any, to the shareholder in each of the following independent cases. In all cases, assume that the 80% test is met.
a. Pierre contributes a vehicle with a FMV of $6,000 and basis of $8,000.
b. Marcus contributes land with a FMV of $500,000, basis of $300,000, and debt of $250,000.
c. Same as b. except Marcus also receives cash of $25,000.
d. Patricia contributes an apartment building with a FMV of $200,000, basis of $50,000, and debt of $125,000.

Accepted Answer

a. Shareholder basis in stock = $8,000;

Question 8

Basira transfers land with a FMV of $900,000 to a newly formed corporation in exchange for all of the stock. The land has a basis of $500,000 and debt of $300,000. Basira's taxable gain from this transaction is:

Accepted Answer

A)  $0. 
B)  $300,000. 
C)  $400,000. 
D) $500,000. 
A)  $0. 
B)  $300,000. 
C)  $400,000. 
D) $500,000.

Question 9

A corporation has a fiscal year-end of May. If the corporation receives an automatic six-month extension to file its return, the return will be due on the 15th of:

Accepted Answer

A)  November. 
B)  December. 
C)  January. 
D) February. 
A)  November. 
B)  December. 
C)  January. 
D) February.

Question 10

Which of the following statements is correct?

Accepted Answer

A)  If a corporation has a net operating loss, it can carry the loss back three years and then forward twenty years. 
B)  A net capital loss can be carried back three years and then forward five years. 
C)  The first estimated payment of a corporation is due on the 15th day of the third month of the fiscal year. 
D) A corporation is entitled to a charitable deduction of 10% of its gross income before certain items. 
A)  If a corporation has a net operating loss, it can carry the loss back three years and then forward twenty years. 
B)  A net capital loss can be carried back three years and then forward five years. 
C)  The first estimated payment of a corporation is due on the 15th day of the third month of the fiscal year. 
D) A corporation is entitled to a charitable deduction of 10% of its gross income before certain items.

Question 11

Corporate distributions in excess of earnings and profits are a capital gain to a stockholder.

Accepted Answer

A) True 
 B)False

Question 12

TTT Corporation has a fiscal year-end that ends on March 30. It is required to make quarterly estimated payments. The first estimated payment will be due on the 15th of:

Accepted Answer

A)  May. 
B)  June. 
C)  July. 
D) August. 
A)  May. 
B)  June. 
C)  July. 
D) August.

Question 13

There are four characteristics that a C Corporation must meet in order to elect Subchapter S status. List the characteristics.

Accepted Answer

To elect Subchapter S status a corporati

Question 14

Arturo transfers land with a FMV of $900,000 to a newly-formed corporation in exchange for all of the stock. The land has a basis of $600,000 and debt of $400,000. The basis of the land, in the hands of the corporation is:

Accepted Answer

A)  $300,000. 
B)  $400,000. 
C)  $600,000. 
D) $900,000. 
A)  $300,000. 
B)  $400,000. 
C)  $600,000. 
D) $900,000.

Question 15

Adam owns 100% of Banana Company and has a basis of $60,000 in its stock. The company has earnings and profits of $54,000 and distributes a cash dividend to Adam of $72,000. Adam has a:

Accepted Answer

A)  Nontaxable distribution of $18,000. 
B)  Capital gain of $12,000. 
C)  Dividend of $72,000. 
D) Nontaxable distribution of $6,000. 
A)  Nontaxable distribution of $18,000. 
B)  Capital gain of $12,000. 
C)  Dividend of $72,000. 
D) Nontaxable distribution of $6,000.

Question 16

Determine the amount of taxable dividend, return of capital, and capital gain in each of the following independent cases.
a. Corporate earnings and profits of $100,000; stockholder basis in stock of $60,000; distribution of $20,000.
b. Corporate earnings and profits of $25,000; stockholder basis in stock of $40,000; distribution of $70,000.
c. Corporate earnings and profits of $300,000; stockholder basis in stock of $450,000; distribution of $350,000.

Accepted Answer

a. Dividend = $20,000; return of capital

Question 17

When the 80% test is met, a stockholder may recognize a gain but will not recognize a loss.

Accepted Answer

A) True 
 B)False

Question 18

The basis of property received by a corporation is equal to the basis in the hands of the shareholder plus any gain recognized by the shareholder.

Accepted Answer

A) True 
 B)False

Question 19

Khaki Company is a Subchapter S corporation. It properly reported net income of $100,000 for financial statement purposes. It had charitable contributions of $5,000 and dividend income of $10,000 from a large domestic publicly traded company. What is the ordinary business income of Khaki Company that will be reported to its shareholders on Schedule K-1?

Accepted Answer

A)  $90,000. 
B)  $93,000. 
C)  $95,000. 
D) $100,000. 
A)  $90,000. 
B)  $93,000. 
C)  $95,000. 
D) $100,000.

Question 20

A corporation can deduct a charitable contribution of up to 50% of its adjusted gross income.

Accepted Answer

A) True 
 B)False

Once a corporation properly elects to be a Subchapter S corporation, it cannot terminate its election for five years.

The maximum marginal corporate tax rate is 35%.

To legally operate as a corporation in most states, the incorporators must simply file a corporate federal income tax return.

Corporate distributions to shareholders are called dividends.

If a corporation has a net capital loss, the loss is carried forward indefinitely.

Schedule L is a reconciliation of net income per books to net income per the tax law.

Basira transfers land with a FMV of $900,000 to a newly formed corporation in exchange for all of the stock. The land has a basis of $500,000 and debt of $300,000. Basira's taxable gain from this transaction is:

A corporation has a fiscal year-end of May. If the corporation receives an automatic six-month extension to file its return, the return will be due on the 15^th of:

Which of the following statements is correct?

Corporate distributions in excess of earnings and profits are a capital gain to a stockholder.

TTT Corporation has a fiscal year-end that ends on March 30. It is required to make quarterly estimated payments. The first estimated payment will be due on the 15^th of:

There are four characteristics that a C Corporation must meet in order to elect Subchapter S status. List the characteristics.

Arturo transfers land with a FMV of $900,000 to a newly-formed corporation in exchange for all of the stock. The land has a basis of $600,000 and debt of $400,000. The basis of the land, in the hands of the corporation is:

Adam owns 100% of Banana Company and has a basis of $60,000 in its stock. The company has earnings and profits of $54,000 and distributes a cash dividend to Adam of $72,000. Adam has a:

When the 80% test is met, a stockholder may recognize a gain but will not recognize a loss.

The basis of property received by a corporation is equal to the basis in the hands of the shareholder plus any gain recognized by the shareholder.

A corporation can deduct a charitable contribution of up to 50% of its adjusted gross income.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income

Capital Gains and Other Sales of Property

Rental Property, Royalties, Income From Flow-Through Entities

Tax Credits

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities:

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Filters

Exam 15: Corporate Taxation

Once a corporation properly elects to be a Subchapter S corporation, it cannot terminate its election for five years.

The maximum marginal corporate tax rate is 35%.

To legally operate as a corporation in most states, the incorporators must simply file a corporate federal income tax return.

Corporate distributions to shareholders are called dividends.

If a corporation has a net capital loss, the loss is carried forward indefinitely.

Schedule L is a reconciliation of net income per books to net income per the tax law.

Basira transfers land with a FMV of $900,000 to a newly formed corporation in exchange for all of the stock. The land has a basis of $500,000 and debt of $300,000. Basira's taxable gain from this transaction is:

A corporation has a fiscal year-end of May. If the corporation receives an automatic six-month extension to file its return, the return will be due on the 15th of:

Which of the following statements is correct?

Corporate distributions in excess of earnings and profits are a capital gain to a stockholder.

TTT Corporation has a fiscal year-end that ends on March 30. It is required to make quarterly estimated payments. The first estimated payment will be due on the 15th of:

There are four characteristics that a C Corporation must meet in order to elect Subchapter S status. List the characteristics.

Arturo transfers land with a FMV of $900,000 to a newly-formed corporation in exchange for all of the stock. The land has a basis of $600,000 and debt of $400,000. The basis of the land, in the hands of the corporation is:

Adam owns 100% of Banana Company and has a basis of $60,000 in its stock. The company has earnings and profits of $54,000 and distributes a cash dividend to Adam of $72,000. Adam has a:

When the 80% test is met, a stockholder may recognize a gain but will not recognize a loss.

The basis of property received by a corporation is equal to the basis in the hands of the shareholder plus any gain recognized by the shareholder.

A corporation can deduct a charitable contribution of up to 50% of its adjusted gross income.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income

Capital Gains and Other Sales of Property

Rental Property, Royalties, Income From Flow-Through Entities

Tax Credits

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities:

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Filters

A corporation has a fiscal year-end of May. If the corporation receives an automatic six-month extension to file its return, the return will be due on the 15^th of:

TTT Corporation has a fiscal year-end that ends on March 30. It is required to make quarterly estimated payments. The first estimated payment will be due on the 15^th of: