Exam 13: Corporate Formations and Operations

Boston, Inc. made a capital contribution of investment property to its 100 percent-owned subsidiary, Hartford Company. The investment property had a fair market value of $1,000,000 and a tax basis to Boston of $250,000. What are the tax consequences to Boston, Inc. on the contribution of the investment property to Hartford Company and what is the tax basis of the investment property to Hartford Company after the contribution to capital?

Which of the following is unnecessary to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity?

Which of the following regarding Schedule M-1 and Schedule M-3 of Form 1120 is false?

On December 31, 2015, Khors Company issued nonqualified stock options to its CEO. The options fully vest on December 31, 2016 and the options were valued at $50,000 on the grant date. Ms. Svaro exercised the options on December 31, 2016. The total bargain element at the time of exercise was $40,000. For 2016, what is the nature of the book-tax difference due to the options exercised?

GenerUs Inc.'s board of directors approved a charitable cash contribution to FoodBank, a qualified non-profit organization, in November of 2016. GenerUs made payment to FoodBank on February 2, 2017. GenerUs Inc. (a calendar-year corporation) may claim a deduction for the contribution on its 2016 tax return.

During the year, AutoUSA Inc. received $4,600,000 of book income, including $20,000 of interest income from tax-exempt municipal bonds. AutoUSA reported $3,600,000 of regular business expenses. If it made $350,000 of estimated tax payments (prepayments) throughout the tax year, what is its tax due or tax refund when it files its return? Assume AutoUSA pays taxes at a flat 34 percent rate and disregard the alternative minimum tax.

Which of the following requirements do not have to be met in a section 351 transaction?

Which of the following statements regarding controlled groups is false?

Pure Action Cycles Inc., a bicycle manufacturer, has a net capital loss in 2016 of $64,000. It had net capital gains of $21,500 in 2015, $45,000 in 2014, $0 in 2013 (but suffered a net operating loss in 2013), and $8,000 of net capital gain in 2012. What is the net capital gain in 2015 after the carryback is applied?

Corporations are not allowed to deduct charitable contributions in excess of 10% of the corporation's taxable income (before the charitable contribution and certain other deductions).

Volos Company (a calendar-year corporation) began operations in March of 2014 and was not profitable through December of 2015. Volos has been profitable for the first quarter of 2016 and is trying to determine its first quarter estimated tax payment (it expects a tax liability for the year of over $30,000). It will have no estimated tax payment requirement in 2016 because it had no tax liability for the 2015 tax year and has been in business for at least 12 months.

Studios reported a net capital loss of $30,000 in year 5. It reported net capital gains of $14,000 in year 4 and $27,000 in year 6. What is the amount and nature of the book-tax difference in year 6 related to the net capital carryover?

Z Corporation has AMTI of $250,000, which exceeds the AMT exemption phase-out threshold by $100,000. What is Z's tentative minimum tax?

Which of the following statements regarding capital gains and losses is false?

Gain or loss realized in a section 351 transaction will be recognized if the taxpayer receives boot in the exchange.

For book purposes, RadioAircast Inc. reported $15,000 of income from municipal bonds in 2015. It also expensed $12,000 of radio station filing fines paid to the FCC (a governmental agency) the same year. What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the total adjustment is permanent and what amount is temporary?

The amount of a corporation's AMT is the amount of its tentative minimum tax in excess of its regular tax.

BTW Corporation has taxable income in the current year that can be offset with an NOL from a previous year. What is the nature of the book-tax difference created by the net operating loss carryover deduction in the current year?

Jazz Corporation owns 50% of Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income before the dividend was $100,000. What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Which of the following is not a type of controlled group as defined in the Internal Revenue Code?