Question 1

A manufacturing corporation is owned equally by 10 unrelated individuals.Its taxable income this year is $100,000 and its regular federal income tax liability is $22,250.The company claims a $15,000 dividends-received deduction and pays $25,000 dividends to its shareholders.The corporation had accumulated earnings and profits of $220,000 at the end of the preceding year.The company's reasonable needs of the business at the end of the year is $240,000.What is the amount of the accumulated earnings tax?

Accepted Answer

The answer of A manufacturing corporation is owned equally by...

Question 2

In computing a corporation's NOL,the dividends-received deduction is allowed in full.

Accepted Answer

A) True 
 B)False

Question 3

Individuals Rhett and Scarlet form Lady Corporation.Rhett transfers land and a building with a $140,000 adjusted basis and a $230,000 FMV in exchange for 50% of the stock of Lady Corporation worth $210,000 and a $20,000 note.Scarlet contributes cash of $230,000 for 50% of the stock of Lady Corporation worth $210,000 and a note of the Lady Corporation valued at $20,000.Rhett's recognized gain on the transfer is

Accepted Answer

A) $0. 
B) $20,000. 
C) $70,000. 
D) $90,000.

Question 4

For corporations,NSTCLs and NLTCLs are treated as STCLs for purposes of the carryback and carryforward rules.

Accepted Answer

A) True 
 B)False

Question 5

The purpose of the accumulated earnings tax is to discourage corporations from retaining excessive amounts of earnings if the funds are invested in assets unrelated to the business needs.

Accepted Answer

A) True 
 B)False

Question 6

Concepts Corporation reported the following results for the current year:
  Taxable income from operations does not include the dividend income or the contributions.The dividend income is from minor investments in U.S.publicly traded stocks.Calculate Concept Corporation's taxable income and any carryovers that may be generated.

Accepted Answer

The answer of Concepts Corporation reported the following results for...

Question 7

Chi transfers assets with a $150,000 FMV (basis $80,000)and $100,000 of business-related liabilities to a corporation in exchange for 100% of the corporation's stock with a FMV of $50,000.The corporation assumes the $100,000 mortgage.
a.What is the amount of gain recognized by Chi?
b.What is the adjusted basis of the stock received by Chi?
c.What is the basis of the assets to the corporation?

Accepted Answer

The answer of Chi transfers assets with a $150,000 FMV...

Question 8

A calendar-year corporation has a $75,000 current E&P amount,and a $25,000 positive accumulated E&P balance at the beginning of the year.Shareholders of the corporation have a total basis in outstanding shares of $40,000.The corporation pays a $120,000 distribution to the shareholders.The tax results to the shareholders will be

Accepted Answer

A) dividend income of $100,000 and capital gain of $20,000. 
B) dividend income of $60,000 and capital gain of $60,000. 
C) dividend income of $100,000 and no other consequences. 
D) dividend income of $100,000 and a tax-free return of capital of $20,000.

Question 9

A new start-up corporation is formed by three individuals.They expect the corporation will experience losses in its first few years.The shareholders will prefer to have the corporation taxed as a C corporation rather than making an S election.

Accepted Answer

A) True 
 B)False

Question 10

Charades Corporation is a publicly held company listed on the New York Stock Exchange.During the current year,its chief executive officer,Samantha Chen,receives the following compensation from the corporation: salary,$1,500,000; commissions based on sales generated by Samantha,$200,000; payments to a qualified pension plan,$30,000; and tax-free fringe benefits,$20,000.What is the total amount that Charades may deduct?

Accepted Answer

A) $1,000,000 
B) $1,250,000 
C) $1,500,000 
D) $1,750,000

Question 11

A corporation is owned 70% by Jones and 30% by Smith.Jones owns 70 shares with a cost of $100 each.Smith owns 30 shares with a cost of $100 per share.Smith and Jones are not related.The company redeems Smith's 30 shares at a redemption price of $400 per share.No stock is redeemed from Jones.This is not a redemption to pay death taxes,and it is not a partial liquidation.Smith will recognize

Accepted Answer

A) dividend income of $12,000. 
B) dividend income of $9,000. 
C) capital gain of $12,000. 
D) capital gain of $9,000.

Question 12

Tara and Jeff wish to form TJ Corporation.They have determined that they need initial capitalization of $1,000,000.What tax issues should they consider when determining whether to issue stock only or some combination of debt and equity?

Accepted Answer

The answer of Tara and Jeff wish to form TJ...

Question 13

Common AMT adjustments for corporations include all of the following except

Accepted Answer

A) the difference between MACRS income tax depreciation for personal property and the straight-line depreciation amount. 
B) 75% of the excess of adjusted current earnings over AMTI. 
C) the difference between the U.S.production activities deduction calculated for regular tax purposes and the deduction recalculated using AMTI as a ceiling limitation. 
D) All of the above are common corporate AMT adjustments.

Question 14

Corporations that are members of a brother-sister affiliated group may file a consolidated return if the proper election is made.

Accepted Answer

A) True 
 B)False

Question 15

A corporation has the following capital gains and losses during the current year:  The tax result to the corporation is

Accepted Answer

A) $10,000 NLTCG included in gross income and taxed at ordinary rates; $4,000 NSTCG included in gross income and taxed at reduced rates. 
B) $14,000 included in gross income and taxed at reduced rates. 
C) $14,000 included in gross income and taxed at ordinary rates. 
D) $10,000 NLTCG is included in gross income and taxed at reduced rates; and $4,000 NSTCG included in gross income and taxed at ordinary rates.

Question 16

Greg Corporation,an accrual method taxpayer,had accumulated earnings and profits of $300,000 as of December 31 last year.For its current tax year,Greg's books and records reflect the following:  Based on the above,what is the amount of Greg Corporation's current earnings and profits for this year?

Accepted Answer

A) $120,500 
B) $122,000 
C) $124,500 
D) $129,500

Question 17

The corporate tax return has been prepared for Go Corporation,which showed taxable income of $60,000.Prior to mailing the return,you learn that Go Corporation and Fish Corporation are owned by the same stockholders.Since Go Corp.and Fish Corp.are brother-sister corporations,it will be necessary for you to recompute the tax liability for Go Corporation,based on an equal apportionment of the lower tax rates.What will be the corrected tax liability for Go Corporation?

Accepted Answer

A) $9,000 
B) $14,525 
C) $15,025 
D) $21,000

Question 18

Peter transfers an office building into a new corporation in exchange for 100 percent of the stock.In addition,the corporation assumes the mortgage on the building.Peter will treat the debt relief as boot and have to recognize gain.

Accepted Answer

A) True 
 B)False

Question 19

Trestle Corp.received $100,000 of dividend income from minor holdings (less than 20%)in U.S.publicly traded corporations.Determine the allowable dividend-received deduction under the following assumptions of net income from operations:
a.Net income from operations is $600,000.
b.Net income from operations is ($10,000).
c.Net income from operations is ($150,000).

Accepted Answer

The answer of Trestle Corp.received $100,000 of dividend income from...

Question 20

If certain requirements are met,Sec.351 permits deferral of recognition of gain or loss on the transfer of property to a corporation solely in exchange for stock of the corporation.

Accepted Answer

A) True 
 B)False

Exam 32: Corporations

In computing a corporation's NOL,the dividends-received deduction is allowed in full.

For corporations,NSTCLs and NLTCLs are treated as STCLs for purposes of the carryback and carryforward rules.

The purpose of the accumulated earnings tax is to discourage corporations from retaining excessive amounts of earnings if the funds are invested in assets unrelated to the business needs.

A new start-up corporation is formed by three individuals.They expect the corporation will experience losses in its first few years.The shareholders will prefer to have the corporation taxed as a C corporation rather than making an S election.

Tara and Jeff wish to form TJ Corporation.They have determined that they need initial capitalization of $1,000,000.What tax issues should they consider when determining whether to issue stock only or some combination of debt and equity?

Common AMT adjustments for corporations include all of the following except

Corporations that are members of a brother-sister affiliated group may file a consolidated return if the proper election is made.

A corporation has the following capital gains and losses during the current year: The tax result to the corporation is

Greg Corporation,an accrual method taxpayer,had accumulated earnings and profits of $300,000 as of December 31 last year.For its current tax year,Greg's books and records reflect the following: Based on the above,what is the amount of Greg Corporation's current earnings and profits for this year?

Peter transfers an office building into a new corporation in exchange for 100 percent of the stock.In addition,the corporation assumes the mortgage on the building.Peter will treat the debt relief as boot and have to recognize gain.

If certain requirements are met,Sec.351 permits deferral of recognition of gain or loss on the transfer of property to a corporation solely in exchange for stock of the corporation.