Question 1

Which of the following statements best describes the concept of control as it applies to a section 351 transaction?

Accepted Answer

A)  Control is defined as the ownership of 80 percent or more of a corporation's voting stock. 
B)  Control is defined as the ownership of 80 percent or more of the fair market value of a corporation's stock. 
C)  Control is defined as the ownership of 80 percent or more of a corporation's voting stock and 80 percent or more of the fair market value of a corporation's stock. 
D)  Control is defined as the ownership of 80 percent or more of a corporation's voting stock and 80 percent or more of the total number of shares of each class of nonvoting stock. 
A)  Control is defined as the ownership of 80 percent or more of a corporation's voting stock. 
B)  Control is defined as the ownership of 80 percent or more of the fair market value of a corporation's stock. 
C)  Control is defined as the ownership of 80 percent or more of a corporation's voting stock and 80 percent or more of the fair market value of a corporation's stock. 
D)  Control is defined as the ownership of 80 percent or more of a corporation's voting stock and 80 percent or more of the total number of shares of each class of nonvoting stock. D

Question 2

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

Accepted Answer

A)  Net capital loss carrybacks 
B)  NOL carrybacks 
C)  NOL carryovers 
D)  Charitable contributions 
A)  Net capital loss carrybacks 
B)  NOL carrybacks 
C)  NOL carryovers 
D)  Charitable contributions C

Question 3

Han transferred land he held as an investment to his corporation in a section 351 transaction. Han had held the land for two years prior to the transfer. Han's holding period in the stock he received in the exchange includes the period for which he held the land before transferring it to the corporation.

Accepted Answer

A) True 
 B)False  True

Question 4

To meet the control test under section 351, a taxpayer transferring property to a corporation must by himself own 80 percent or more of the corporation's voting stock and 80 percent of each class of nonvoting stock after the transfer even if there are other transferors of property.

Accepted Answer

A) True 
 B)False

Question 5

Carlos transfers property with a tax basis of $500 and a fair market value of $800 to a corporation in exchange for stock with a fair market value of $650 and $50 cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $100 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

Accepted Answer

A)  $800 
B)  $600 
C)  $550 
D)  $450 
A)  $800 
B)  $600 
C)  $550 
D)  $450

Question 6

Which of the following statements regarding the alternative minimum tax is false?

Accepted Answer

A)  Corporations compute the AMT by multiplying their AMT base by 35 percent and subtracting their regular tax liability. 
B)  Small corporations are exempt from the AMT. 
C)  All first-year corporations are exempt from the AMT. 
D)  None of these is false (choose if you believe all of these are true). 
A)  Corporations compute the AMT by multiplying their AMT base by 35 percent and subtracting their regular tax liability. 
B)  Small corporations are exempt from the AMT. 
C)  All first-year corporations are exempt from the AMT. 
D)  None of these is false (choose if you believe all of these are true).

Question 7

Which of the following statements regarding AMT is true?

Accepted Answer

A)  Only very profitable companies (AMTI greater than $1 million) have their AMT exemption phased out. 
B)  The AMT exemption is phased out dollar for dollar as AMTI increases. 
C)  Minimum tax credits are generated whenever regular tax liability exceeds tentative minimum tax. 
D)  Minimum tax credits can be carried forward indefinitely. 
A)  Only very profitable companies (AMTI greater than $1 million) have their AMT exemption phased out. 
B)  The AMT exemption is phased out dollar for dollar as AMTI increases. 
C)  Minimum tax credits are generated whenever regular tax liability exceeds tentative minimum tax. 
D)  Minimum tax credits can be carried forward indefinitely.

Question 8

Which of the following statements regarding net operating losses is true?

Accepted Answer

A)  Corporations can carry net operating losses back two years and forward up to 15 years. 
B)  A corporation may elect to forgo carrying a net operating loss back and instead carry it over to future years. 
C)  When a corporation applies a net operating loss carryover, it reports a favorable, permanent book-tax difference in the amount of the applied carryover. 
D)  Marginal tax rates are irrelevant in determining the tax benefit of applying a net operating loss carryback or carryover. 
E)  None of these is a true statement. 
A)  Corporations can carry net operating losses back two years and forward up to 15 years. 
B)  A corporation may elect to forgo carrying a net operating loss back and instead carry it over to future years. 
C)  When a corporation applies a net operating loss carryover, it reports a favorable, permanent book-tax difference in the amount of the applied carryover. 
D)  Marginal tax rates are irrelevant in determining the tax benefit of applying a net operating loss carryback or carryover. 
E)  None of these is a true statement.

Question 9

Which of the following is not calculated in the corporate income tax formula?

Accepted Answer

A)  Gross income 
B)  Adjusted gross income 
C)  Taxable income 
D)  Regular tax liability 
A)  Gross income 
B)  Adjusted gross income 
C)  Taxable income 
D)  Regular tax liability

Question 10

Rachelle transfers property with a tax basis of $800 and a fair market value of $900 to a corporation in exchange for stock with a fair market value of $750 and $50 cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $100 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

Accepted Answer

A)  $900 
B)  $850 
C)  $800 
D)  $750 
A)  $900 
B)  $850 
C)  $800 
D)  $750

Question 11

Taxable income of the most profitable corporations is subject to a flat 35% tax rate.

Accepted Answer

A) True 
 B)False

Question 12

Corporations compute their dividends received deduction by multiplying the dividend amount by 10 percent, 50 percent, or 100 percent depending on their ownership in the distributing corporation's stock.

Accepted Answer

A) True 
 B)False

Question 13

Depreciation adjustments can increase or decrease the AMT base relative to taxable income.

Accepted Answer

A) True 
 B)False

Question 14

It is important to distinguish between temporary and permanent book-tax differences for which of the following reasons?

Accepted Answer

A)  Temporary book-tax differences will reverse in future years whereas permanent differences will not. 
B)  Certain corporations are required to disclose book-tax differences as permanent or temporary on their tax returns. 
C)  Both A and B 
D)  Neither A nor B 
A)  Temporary book-tax differences will reverse in future years whereas permanent differences will not. 
B)  Certain corporations are required to disclose book-tax differences as permanent or temporary on their tax returns. 
C)  Both A and B 
D)  Neither A nor B

Question 15

VitalJuice Corporation reports the following schedule of prior year taxes it owed: $$\begin{array} { | l | r | } 
\hline \text { Tax basis of property transterred } & \$ 650,000 \
\hline \text { Plus gain recognized } & 30,000 \
\hline \text { Less boot received } & ( 100,000 ) \
\hline \text { - Adjusted tax basis of the stock received } & 580,000 \
\hline
\end{array}$$ What is VitalJuice's tax liability for Year 4?

Accepted Answer

$750,000.
Explanation: VitalJuice genera

Question 16

For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.

Accepted Answer

A) True 
 B)False

Question 17

Controlled group provisions in the tax law prevent taxpayers from splitting a corporation into several smaller corporations to take advantage of low marginal corporate tax rates at low levels of income.

Accepted Answer

A) True 
 B)False

Question 18

For a corporation, purchased goodwill generally leads to temporary book-tax differences.

Accepted Answer

A) True 
 B)False

Question 19

WFO Corporation has gross receipts according to the following schedule: $$\begin{array} { | l | r | } 
\hline \text { Year } 1 & \$ 2 \text { million } \
\hline \text { Year } 2 & \$ 4 \text { million } \
\hline \text { Year } 3 & \$ 6 \text { million } \
\hline \text { Year 4 } & \$ 4.5 \text { million } \
\hline \text { Year } 5 & \$ 5 \text { million } \
\hline \text { Year } 6 & \$ 7 \text { million } \
\hline
\end{array}$$ If WFO began business as a cash-method corporation in Year 1, in which year would it have first been required to use the accrual method?

Accepted Answer

A)  Year 3 
B)  Year 4 
C)  Year 5 
D)  Year 6 
E)  None of these. 
A)  Year 3 
B)  Year 4 
C)  Year 5 
D)  Year 6 
E)  None of these.

Question 20

In contrast to an individual, a corporation may deduct the entire amount of a net capital loss.

Accepted Answer

A) True 
 B)False

Which of the following statements best describes the concept of control as it applies to a section 351 transaction?

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

To meet the control test under section 351, a taxpayer transferring property to a corporation must by himself own 80 percent or more of the corporation's voting stock and 80 percent of each class of nonvoting stock after the transfer even if there are other transferors of property.

Which of the following statements regarding the alternative minimum tax is false?

Which of the following statements regarding AMT is true?

Which of the following statements regarding net operating losses is true?

Which of the following is not calculated in the corporate income tax formula?

Taxable income of the most profitable corporations is subject to a flat 35% tax rate.

Corporations compute their dividends received deduction by multiplying the dividend amount by 10 percent, 50 percent, or 100 percent depending on their ownership in the distributing corporation's stock.

Depreciation adjustments can increase or decrease the AMT base relative to taxable income.

It is important to distinguish between temporary and permanent book-tax differences for which of the following reasons?

VitalJuice Corporation reports the following schedule of prior year taxes it owed: Tax basis of property transterred \ 650,000 Plus gain recognized 30,000 Less boot received (100,000) - Adjusted tax basis of the stock received 580,000 What is VitalJuice's tax liability for Year 4?

For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.

Controlled group provisions in the tax law prevent taxpayers from splitting a corporation into several smaller corporations to take advantage of low marginal corporate tax rates at low levels of income.

For a corporation, purchased goodwill generally leads to temporary book-tax differences.

In contrast to an individual, a corporation may deduct the entire amount of a net capital loss.

An Introduction to Tax

Tax Compliance , the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S: Corporations

Filters

Exam 13: Corporate Formations and Operations

Which of the following statements best describes the concept of control as it applies to a section 351 transaction?

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

To meet the control test under section 351, a taxpayer transferring property to a corporation must by himself own 80 percent or more of the corporation's voting stock and 80 percent of each class of nonvoting stock after the transfer even if there are other transferors of property.

Which of the following statements regarding the alternative minimum tax is false?

Which of the following statements regarding AMT is true?

Which of the following statements regarding net operating losses is true?

Which of the following is not calculated in the corporate income tax formula?

Taxable income of the most profitable corporations is subject to a flat 35% tax rate.

Corporations compute their dividends received deduction by multiplying the dividend amount by 10 percent, 50 percent, or 100 percent depending on their ownership in the distributing corporation's stock.

Depreciation adjustments can increase or decrease the AMT base relative to taxable income.

It is important to distinguish between temporary and permanent book-tax differences for which of the following reasons?

VitalJuice Corporation reports the following schedule of prior year taxes it owed: Tax basis of property transterred \ 650,000 Plus gain recognized 30,000 Less boot received (100,000) - Adjusted tax basis of the stock received 580,000 What is VitalJuice's tax liability for Year 4?

For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.

Controlled group provisions in the tax law prevent taxpayers from splitting a corporation into several smaller corporations to take advantage of low marginal corporate tax rates at low levels of income.

For a corporation, purchased goodwill generally leads to temporary book-tax differences.

In contrast to an individual, a corporation may deduct the entire amount of a net capital loss.

An Introduction to Tax

Tax Compliance , the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S: Corporations

Filters