Act 400

cQuestion 1

0 out of 1 points

Jason, an architect, is the sole shareholder of Purple Corporation, a personal service corporation. The corporation paid

Jason a salary of $120,000 during its fiscal year ending November 30, 2010. How much salary must Purple pay Jason

during the period December 1 through December 31, 2010, to permit the corporation to continue to use its fiscal year

without negative tax effects?

Answer

Selected Answer:

$110,000

Response Feedback: The salary for the deferral period.

Question 2

1 out of 1 points

Ted is the sole shareholder of a C corporation, and Sue owns a sole proprietorship. Both businesses were started in

2010, and each business sustained a $5,000 net capital loss for the year. Which of the following statements is correct?

Answer

Selected Answer:

Ted's corporation can't deduct the $5,000 capital loss in 2010.

Response

Feedback:

A corporation can't deduct a net capital loss in the year incorrect (option b). Individuals cannot carry

back net capital losses (option c.), and can deduct net capital losses against ordinary income only to

the extent of $3,000 in any year (option d.)

Question 3

1 out of 1 points

A technical advice memorandum is issued by:

Answer

Selected Answer:

National Office of the IRS

Response Feedback: The IRS issues the technical advice memorandum

Question 4

0 out of 1 points

Elk, a C corporation, has $500,000 operating income and $350,000 operating expenses during the year. In addition,

Elk has a $20,000 long-term capital gain and a $52,000 short-term capital loss. Elk's taxable income is:

Answer

Selected Answer:

$118,000

Response

Feedback:

$500,000 (operating income) - $350,000 (operating income) + $20,000 (LTCG) - $20,000 (STCL) =

$150,000 taxable income. A corporation cannot deduct a net capital loss in the year incurred. The net

capital loss ($32,000) can be carried back three years and offset against capital gain in the carryback

years. If the capital loss is not used in the carryback, it can be carried forward five years. Capital gains

of corporations are included in taxable income and are not subject to the favorable rates applicable to

individuals.

Question 5

1 out of 1 points

Which of the following statements is incorrect about the check-the-box Regulations?

Answer

Selected

Answer: An entity with more than one owner and formed as a corporation can elect to be taxed as a

partnership.

Response

Feedback:

The check-the-box Regulations are not available for an entity incorporated under state law. The

other statements are correct.

Question 6

0 out of 1 points

Rodney, the sole shareholder of a calendar year, accrual basis C corporation, loaned the corporation a substantial

amount of money on January 1, 2010. The corporation accrued $25,000 of interest expense on the loan on December

31, 2010. It pays the interest to Rodney, a cash basis taxpayer, on February 1, 2011. Under these facts:

Answer

Selected

Answer:

The corporation will be allowed to deduct the interest expense in 2010 and Rodney will be required

to report the interest income in 2011.

Response

Feedback:

A corporation that uses the accrual method cannot claim a deduction for an accrual owed to a related

party until the recipient reports that amount as income. Rodney, a cash basis taxpayer, must report the

income in the year he receives the payment from the corporation.

Question 7

0 out of 1 points

Glen and Michael are equal partners in Trout Enterprises, a calendar year partnership. During the year, Trout

Enterprises had gross income of $400,000 and operating expenses of $220,000. In addition, the partnership sold land

that had been held for investment purposes for a long-term capital gain of $100,000. During the year, Glen withdrew

$60,000 from the partnership, and Michael withdrew $60,000. Discuss the impact of this information on the taxable

income of Trout, Glen, and Michael.

Answer

Selected

Answer:

Trout pays tax on $0 income, Glen's taxable income increases by $200,000, and Michael's taxable

income increases by $200,000.

Response

Feedback:

Trout, a partnership, is not a taxpaying entity. Its profit (loss) and separate items flow through to the

partners. The partnership's Form 1065 reports ordinary business income of $180,000 ($400,000

income - $220,000 expenses). The partnership also reports the $100,000 long-term capital gain as a

separately stated item on Form 1065. Glen and Michael both receive a Schedule K-1 reporting

ordinary business income of $90,000 and separately stated long-term capital gain of $50,000. Each

partner reports ordinary business income of $90,000 and long-term capital gain of $50,000 on his own

return. The withdrawals do not affect taxable income for the partners but decrease their basis in the

partnership.

Question 8

0 out of 1 points

Geneva, a sole proprietor, sold one of her business assets for a $5,000 long-term capital gain. Geneva's marginal tax

rate is 25%. Gulf, a C corporation, sold one of its assets for a $5,000 long-term capital gain. Gulf's marginal tax rate is

25%. What tax rates are applicable to these capital gains?

Answer

Selected Answer:

15% rate applies to both Geneva and Gulf.

Response

Feedback:

Geneva reports the long-term capital gain on her individual tax return, and it is subject to a maximum

tax rate of 15%. Corporations do not receive special tax treatment for long-term capital gains.

Therefore, Gulf's gain will be taxed at 25%.

Question 9

0 out of 1 points

Which provision could best be justified as a means of controlling the economy?

Answer

Selected Answer:

The rehabilitation tax credit

Response Feedback: The accelerated depreciation will save on taxes.

Question 10

0 out of 1 points

Which provision is not justified by social considerations?

Answer

Selected Answer:

Adoption tax credit

Response Feedback: The like-kind exchange treatment does not tie to social considerations.

Question 1

0 out of 1 points

Regarding technical advice memoranda, which statement is incorrect?

Answer

Selected Answer:

Issued by the National Office of IRS

Response Feedback: This may not be used as precedent.

Question 2

1 out of 1 points

Which provision is not justified by social considerations?

Answer

Selected Answer:

Like-kind exchange treatment


Question 3

0 out of 1 points

Bjorn owns a 35% interest in an S corporation that earned $200,000 in 2010. He also owns 10% of the stock in a C

corporation that earned $200,000 during the year. The S corporation distributed $10,000 to Bjorn and the C

corporation paid dividends of $10,000 to Bjorn. How much income must Bjorn report from these businesses?

Answer

Selected Answer:

$70,000 income from the S corporation and $0 income from the C corporation.

Response

Feedback:

Bjorn must report his $70,000 share ($200,000 ? 35%) of the S corporation's income on his

individual tax return. He will report $10,000 of dividend income from the C corporation.

Question 4

0 out of 1 points





Answer

Selected Answer:

$20,000


Question 5

1 out of 1 points

Juanita owns 45% of the stock in a C corporation that had a profit of $120,000 in 2010. Carlos owns a 45% interest in

a partnership that had a profit of $120,000 during the year. The corporation distributed $20,000 to Juanita, and the

partnership distributed $20,000 to Carlos. Which of the following statements relating to 2010 is incorrect?

Answer

Selected Answer:

Carlos must report $20,000 of income from the partnership.

Response

Feedback:

Carlos must report his share of the partnership income without regard to distributions, or $54,000

($120,000 x 45% partnership interest)

Question 6

0 out of 1 points

Regulations may first be found in:

Answer

Selected Answer:

Internal Revenue Bulletin

Response Feedback: Regulations are first published in the Federal Register

Question 7

1 out of 1 points




Answer

Selected

Answer:



Response

Feedback:




Question 8

0 out of 1 points






Answer

Selected Answer:

None of the above.

Response

Feedback:








partnership.

Question 9

1 out of 1 points


Answer

Selected Answer:

Accelerated depreciation method for depreciable capital expenditures.


Question 10

1 out of 1 points


Answer

Selected Answer:



Question 1

1 out of 1 points




Answer

Selected

Answer:



Response

Feedback:




Question 2

1 out of 1 points

Regulations may first be found in:

Answer

Selected Answer:

Federal Register


Question 3

1 out of 1 points






Answer

Selected

Answer:

Trout pays tax on $0 income, Glen's taxable income increases by $140,000, and Michael's taxable

income increases by $140,000.

Response

Feedback:








partnership.

Question 4

1 out of 1 points


Answer

Selected Answer:



Question 5

1 out of 1 points

Elk, a C corporation, has $500,000 operating income and $350,000 operating expenses during the year. In addition,

Elk has a $20,000 long-term capital gain and a $52,000 short-term capital loss. Elk's taxable income is:

Answer

Selected Answer:

$150,000

Response

Feedback:

$500,000 (operating income) - $350,000 (operating income) + $20,000 (LTCG) - $20,000 (STCL) =

$150,000 taxable income. A corporation cannot deduct a net capital loss in the year incurred. The net

capital loss ($32,000) can be carried back three years and offset against capital gain in the carryback

years. If the capital loss is not used in the carryback, it can be carried forward five years. Capital gains

of corporations are included in taxable income and are not subject to the favorable rates applicable to

individuals.

Question 6

1 out of 1 points


Answer

Selected Answer:



Question 7

1 out of 1 points

Geneva, a sole proprietor, sold one of her business assets for a $5,000 long-term capital gain. Geneva's marginal tax

rate is 25%. Gulf, a C corporation, sold one of its assets for a $5,000 long-term capital gain. Gulf's marginal tax rate is

25%. What tax rates are applicable to these capital gains?

Answer

Selected Answer:

15% rate applies to Geneva and 25% rate applies to Gulf.

Response

Feedback:

Geneva reports the long-term capital gain on her individual tax return, and it is subject to a maximum

tax rate of 15%. Corporations do not receive special tax treatment for long-term capital gains.

Therefore, Gulf's gain will be taxed at 25%.

Question 8

0 out of 1 points

Douglas and Sue, related parties, are landlord and tenant as to certain business property. If the IRS questions the

amount of rent Sue is paying to Douglas, this is an illustration of the:

Answer

Selected Answer:

Substance over form concept

Response Feedback: Arm's length means that they pay what they would pay someone else.

Question 9

0 out of 1 points





Answer

Selected Answer:

$120,000


Question 10

1 out of 1 points

Juanita owns 45% of the stock in a C corporation that had a profit of $120,000 in 2010. Carlos owns a 45% interest in

a partnership that had a profit of $120,000 during the year. The corporation distributed $20,000 to Juanita, and the

partnership distributed $20,000 to Carlos. Which of the following statements relating to 2010 is incorrect?

Answer

Selected Answer:


Response

Feedback:

Carlos must report his share of the partnership income without regard to distributions, or $54,000

($120,000 x 45% partnership interest)

Question 1

1 out of 1 points

Bjorn owns a 35% interest in an S corporation that earned $200,000 in 2010. He also owns 10% of the stock

in a C corporation that earned $200,000 during the year. The S corporation distributed $10,000 to Bjorn and

the C corporation paid dividends of $10,000 to Bjorn. How much income must Bjorn report from these

businesses? Answer

Selected

Answer:

$70,000 income from the S corporation and $10,000 of dividend income from the C

corporation.

Response

Feedback: Bjorn must report his $70,000 share ($200,000 ? 35%) of the S corporation's income on his


Question 2

1 out of 1 points

Douglas and Sue, related parties, are landlord and tenant as to certain business property. If the IRS questions

the amount of rent Sue is paying to Douglas, this is an illustration of the: Answer

Selected Answer:

Arm's length concept


Question 3

1 out of 1 points


Enterprises had gross income of $400,000 and operating expenses of $220,000. In addition, the partnership

sold land that had been held for investment purposes for a long-term capital gain of $100,000. During the

year, Glen withdrew $60,000 from the partnership, and Michael withdrew $60,000. Discuss the impact of

this information on the taxable income of Trout, Glen, and Michael. Answer

Selected

Answer:

Trout pays tax on $0 income, Glen's taxable income increases by $140,000, and Michael's

taxable income increases by $140,000.

Response

Feedback: Trout, a partnership, is not a taxpaying entity. Its profit (loss) and separate items flow through to

the partners. The partnership's Form 1065 reports ordinary business income of $180,000

($400,000 income - $220,000 expenses). The partnership also reports the $100,000 long-term

capital gain as a separately stated item on Form 1065. Glen and Michael both receive a

Schedule K-1 reporting ordinary business income of $90,000 and separately stated long-term

capital gain of $50,000. Each partner reports ordinary business income of $90,000 and long-

term capital gain of $50,000 on his own return. The withdrawals do not affect taxable income

for the partners but decrease their basis in the partnership.

Question 4

1 out of 1 points

Which of the following statements is incorrect about the check-the-box Regulations? Answer

Selected

Answer:

An entity with more than one owner and formed as a corporation can elect to be taxed as a

partnership.

Response

Feedback: The check-the-box Regulations are not available for an entity incorporated under state law.

The other statements are correct.

Question 5

0 out of 1 points

Regarding technical advice memoranda, which statement is incorrect? Answer

Selected Answer:

Issued by the National Office of IRS

Response Feedback: This may not be used as precedent.

Question 6

1 out of 1 points

Juanita owns 45% of the stock in a C corporation that had a profit of $120,000 in 2010. Carlos owns a 45%

interest in a partnership that had a profit of $120,000 during the year. The corporation distributed $20,000 to

Juanita, and the partnership distributed $20,000 to Carlos. Which of the following statements relating to

2010 is incorrect? Answer

Selected Answer:


Response

Feedback: Carlos must report his share of the partnership income without regard to distributions, or

$54,000 ($120,000 x 45% partnership interest)

Question 7

1 out of 1 points

Which provision is not justified by social considerations? Answer

Selected Answer:



Question 8

1 out of 1 points

Elk, a C corporation, has $500,000 operating income and $350,000 operating expenses during the year. In

addition, Elk has a $20,000 long-term capital gain and a $52,000 short-term capital loss. Elk's taxable

income is: Answer

Selected Answer:

$150,000

Response

Feedback: $500,000 (operating income) - $350,000 (operating income) + $20,000 (LTCG) - $20,000

(STCL) = $150,000 taxable income. A corporation cannot deduct a net capital loss in the year

incurred. The net capital loss ($32,000) can be carried back three years and offset against capital

gain in the carryback years. If the capital loss is not used in the carryback, it can be carried

forward five years. Capital gains of corporations are included in taxable income and are not

subject to the favorable rates applicable to individuals.

Question 9

1 out of 1 points

Geneva, a sole proprietor, sold one of her business assets for a $5,000 long-term capital gain. Geneva's

marginal tax rate is 25%. Gulf, a C corporation, sold one of its assets for a $5,000 long-term capital gain.

Gulf's marginal tax rate is 25%. What tax rates are applicable to these capital gains? Answer

Selected Answer:


Response

Feedback: Geneva reports the long-term capital gain on her individual tax return, and it is subject to a

maximum tax rate of 15%. Corporations do not receive special tax treatment for long-term

capital gains. Therefore, Gulf's gain will be taxed at 25%.

Question 10

1 out of 1 points

Rodney, the sole shareholder of a calendar year, accrual basis C corporation, loaned the corporation a

substantial amount of money on January 1, 2010. The corporation accrued $25,000 of interest expense on the

loan on December 31, 2010. It pays the interest to Rodney, a cash basis taxpayer, on February 1, 2011.

Under these facts: Answer

Selected

Answer: The corporation will be allowed to deduct the interest expense in 2011 and Rodney will be

required to report the interest income in 2011.

Response

Feedback: A corporation that uses the accrual method cannot claim a deduction for an accrual owed to a

related party until the recipient reports that amount as income. Rodney, a cash basis taxpayer,

must report the income in the year he receives the payment from the corporation.

Question 1

1 out of 1 points

Which provision is not justified by social considerations? Answer

Selected Answer:



Question 2

1 out of 1 points

Regulations may first be found in: Answer

Selected Answer:

Federal Register


Question 3

1 out of 1 points

Which provision could best be justified as a means of controlling the economy? Answer

Selected Answer:



Question 4

1 out of 1 points

Which of the following statements is incorrect about the check-the-box Regulations? Answer

Selected

Answer:

An entity with more than one owner and formed as a corporation can elect to be taxed as a

partnership.

Response

Feedback: The check-the-box Regulations are not available for an entity incorporated under state law.

The other statements are correct.

Question 5

1 out of 1 points

Geneva, a sole proprietor, sold one of her business assets for a $5,000 long-term capital gain. Geneva's

marginal tax rate is 25%. Gulf, a C corporation, sold one of its assets for a $5,000 long-term capital gain.

Gulf's marginal tax rate is 25%. What tax rates are applicable to these capital gains? Answer

Selected Answer:


Response Geneva reports the long-term capital gain on her individual tax return, and it is subject to a

Feedback: maximum tax rate of 15%. Corporations do not receive special tax treatment for long-term

capital gains. Therefore, Gulf's gain will be taxed at 25%.

Question 6

1 out of 1 points

Douglas and Sue, related parties, are landlord and tenant as to certain business property. If the IRS questions

the amount of rent Sue is paying to Douglas, this is an illustration of the: Answer

Selected Answer:

Arm's length concept


Question 7

1 out of 1 points

Elk, a C corporation, has $500,000 operating income and $350,000 operating expenses during the year. In

addition, Elk has a $20,000 long-term capital gain and a $52,000 short-term capital loss. Elk's taxable

income is: Answer

Selected Answer:

$150,000

Response

Feedback: $500,000 (operating income) - $350,000 (operating income) + $20,000 (LTCG) - $20,000

(STCL) = $150,000 taxable income. A corporation cannot deduct a net capital loss in the year

incurred. The net capital loss ($32,000) can be carried back three years and offset against capital

gain in the carryback years. If the capital loss is not used in the carryback, it can be carried

forward five years. Capital gains of corporations are included in taxable income and are not

subject to the favorable rates applicable to individuals.

Question 8

1 out of 1 points

Jason, an architect, is the sole shareholder of Purple Corporation, a personal service corporation. The

corporation paid Jason a salary of $120,000 during its fiscal year ending November 30, 2010. How much

salary must Purple pay Jason during the period December 1 through December 31, 2010, to permit the

corporation to continue to use its fiscal year without negative tax effects? Answer

Selected Answer:

$10,000


Question 9

1 out of 1 points

Bjorn owns a 35% interest in an S corporation that earned $200,000 in 2010. He also owns 10% of the stock

in a C corporation that earned $200,000 during the year. The S corporation distributed $10,000 to Bjorn and

the C corporation paid dividends of $10,000 to Bjorn. How much income must Bjorn report from these

businesses? Answer

Selected

Answer:

$70,000 income from the S corporation and $10,000 of dividend income from the C

corporation.

Response

Feedback: Bjorn must report his $70,000 share ($200,000 ? 35%) of the S corporation's income on his


Question 10

1 out of 1 points


Enterprises had gross income of $400,000 and operating expenses of $220,000. In addition, the partnership

sold land that had been held for investment purposes for a long-term capital gain of $100,000. During the

year, Glen withdrew $60,000 from the partnership, and Michael withdrew $60,000. Discuss the impact of

this information on the taxable income of Trout, Glen, and Michael. Answer

Selected

Answer:

Trout pays tax on $0 income, Glen's taxable income increases by $140,000, and Michael's

taxable income increases by $140,000.

Response

Feedback: Trout, a partnership, is not a taxpaying entity. Its profit (loss) and separate items flow through to

the partners. The partnership's Form 1065 reports ordinary business income of $180,000

($400,000 income - $220,000 expenses). The partnership also reports the $100,000 long-term

capital gain as a separately stated item on Form 1065. Glen and Michael both receive a

Schedule K-1 reporting ordinary business income of $90,000 and separately stated long-term

capital gain of $50,000. Each partner reports ordinary business income of $90,000 and long-

term capital gain of $50,000 on his own return. The withdrawals do not affect taxable income

for the partners but decrease their basis in the partnership.

Question 1

0 out of 1 points

Which of the following statements does not reflect the rules regarding pass-through entities and DPAD? Answer

Selected Answer:

The entity allocates to each owner his or her share of any QPAI.

Response

Feedback: Guaranteed payments do not count as wages (choice c), but a partner can count other W-2

wages paid (choice c).

Question 2

1 out of 1 points

Bacon Corporation manufactures an exercise machine at a cost of $800 and sells the machine to Kirby

Corporation for $1,000 in 2010. Kirby incurs TV advertising expenses of $300 and sells the machine by

phone order for $1,700. If Bacon and Kirby corporations are members of an expanded affiliated group

(EAG), their QPAI is: Answer

Selected Answer:

$600

Response Feedback: QPAI is $600 ($1,700 - $800 - $300).

Question 3

0 out of 1 points

Yvonne Corporation manufactures and sells ceramic dinnerware. The company also sells dinnerware that is

purchased from unrelated foreign producers. During tax year 2010, Yvonne had a U. S. profit of $1.2 million

(QPAI) and a loss from the imported merchandise of $100,000. What is Yvonne's DPAD? Answer

Selected Answer:

$66,000

Response Feedback: $99,000 (9% x $1.1 million). The taxable income limitation applies.

Question 4

0 out of 1 points

Lemon, Inc., has taxable income of $13 million in 2010. What is the maximum DPAD tax savings for this C

corporation? Answer

Selected Answer:

$273,000

Response Feedback: $13 million x 9% x 35% = $409,500

Question 5

0 out of 1 points

Julie's sole proprietorship consists of a bakery and retail food sales. The bakery's DPGR is $700,000, but

after CGS, direct expenses, and a ratable portion of indirect expenses are deducted, QPAI is $100,000. W-2

wages related to DPGR are significant. The retail food sales have a loss of $1 million. If Julie files a joint

return and her modified AGI is $119,500, what is her allowable DPAD, if any, for 2010? Answer

Selected Answer:

$6,000

Response Feedback: $100,000 QPAI x 9% = $9,000

Question 6

0 out of 1 points

Eileen transfers property worth $200,000 (basis of $60,000) to Goldfinch Corporation. In return, she receives

80% of the stock in Goldfinch Corporation (fair market value of $180,000) and a long-term note (fair market

value of $20,000) executed by Goldfinch and made payable to Eileen. Eileen recognizes gain on the transfer

of: Answer

Selected Answer:

$140,000

Response

Feedback: The long-term obligation of Goldfinch Corporation constitutes boot. Thus, Eileen receives

boot in the amount of $20,000 and will recognize gain to that extent.

Question 7

0 out of 1 points

Tara incorporates her sole proprietorship, transferring it to newly formed Black Corporation. The assets

transferred have an adjusted basis of $240,000 and a fair market value of $300,000. Also transferred was

$10,000 in liabilities, $1,000 of which was personal and the balance of $9,000 being business related. In

return for these transfers, Tara receives all of the stock in Black Corporation. Answer

Selected Answer:

Black Corporation has a basis of $240,000 in the property.

Response

Feedback: Tara has a recognized gain of $10,000 that is the amount of the boot she is treated as having

received. Thus, her basis in the Black Corporation stock is $240,000 [$240,000 (basis of the

property given up) - $10,000 (boot received) + $10,000 (gain recognized)]. Black Corporation's

basis in the property is $250,000 [$240,000 (Tara's basis in the property) + $10,000 (gain

recognized by Tara)]. In terms of the $10,000 boot, § 357(b) taints all liabilities even though

some are supported by a bona fide business purpose.

Question 8

0 out of 1 points

Eve transfers property (basis of $120,000 and fair market value of $400,000) to Green Corporation for 80%

of its stock (worth $350,000) and a long-term note (worth $50,000), executed by Green Corporation and

made payable to Eve. As a result of the transfer: Answer

Selected Answer:

Eve recognizes a gain of $230,000.

Response Feedback: A long-term note is treated as “boot.” Thus, Eve is taxed on the value of the note received.

Question 9

0 out of 1 points

Kim owns 100% of the stock of Cardinal Corporation. In the current year Kim transfers an installment

obligation, tax basis of $30,000 and fair market value of $200,000, for additional stock in Cardinal worth

$200,000. Answer

Selected Answer:

Kim has a basis of $200,000 in the additional stock she received in Cardinal Corporation.

Response

Feedback: An installment obligation qualifies as "property" under § 351. Thus, Kim recognizes no gain

on the transfer. Cardinal has a basis of $30,000 in the installment obligation.

Question 10

0 out of 1 points

Sarah and Tony (mother and son) form Dove Corporation with the following investments: cash by Sarah of

$55,000; land by Tony (basis of $35,000 and fair market value of $45,000). Dove Corporation issues 200

shares of stock, 100 each to Sarah and Tony. Thus, each receives stock in Dove worth $50,000. Answer

Selected Answer:

As a result of the transfer, Tony recognizes a gain of $10,000.

Response

Feedback: The fact that the stock was not in proportion to the value of the property transferred (choice a.)

does not prevent § 351 from applying. Since § 351 applies and no boot was received, Tony does

not recognize a gain (choice b.). His basis in the stock is $35,000 plus $5,000, the basis of the

stock implicitly gifted by Sarah to Tony (not $50,000 as in choice c.).

Question 1

1 out of 1 points





Selected Answer:

$9,000


Question 2

1 out of 1 points





Selected Answer:

None of the above

Response







Question 3

0 out of 1 points


Selected Answer:

In the case of partnerships, guaranteed payments are not regarded as W-2 wages.

Response



Question 4

1 out of 1 points




of: Answer

Selected Answer:

$20,000

Response



Question 5

0 out of 1 points

Jane and Walt form Yellow Corporation. Jane transfers equipment worth $950,000 (basis of $200,000) and

cash of $50,000 to Yellow Corporation for 50% of its stock. Walt transfers a building and land worth

$1,050,000 (basis of $400,000) for 50% of Yellow's stock and $50,000 cash. Answer

Selected Answer:

Jane recognizes a gain of $750,000; Walt recognizes a gain of $650,000.

Response

Feedback: Walt's realized gain of $650,000 is recognized to the extent of the $50,000 of "boot"

received.

Question 6

1 out of 1 points



$200,000. Answer

Selected Answer:

Kim recognizes no taxable gain on the transfer.

Response



Question 7

0 out of 1 points

Erica transfers land worth $500,000, basis of $100,000, to a newly formed corporation, Robin Corporation,

for all of Robin's stock, worth $300,000, and a 10-year note. The note was executed by Robin and made

payable to Erica in the amount of $200,000. As a result of the transfer: Answer

Selected Answer:

Erica recognizes gain of $400,000.

Response

Feedback: Erica has a recognized gain of $200,000 which is the amount of the boot she is treated as having

received through her receipt of the securities in Robin Corporation. The basis of the land to

Robin would be equal to the basis Erica had in the land, $100,000, plus the gain recognized by

Erica, $200,000, or $300,000.

Question 8

0 out of 1 points

Which statement is false? Answer

Selected Answer:

The DPAD is not limited to C corporations.

Response Feedback: This is not a deduction from adjusted gross income for a sole proprietor.

Question 9

1 out of 1 points

Lemon, Inc., has taxable income of $13 million in 2010. What is the maximum DPAD tax savings for this C

corporation? Answer

Selected Answer:

$409,500

Response Feedback: $13 million x 9% x 35% = $409,500

Question 10

0 out of 1 points

Maria Corporation manufactures and sells ceramic dinnerware. The company also sells dinnerware that is

purchased from unrelated foreign producers. During the tax year 2010, Maria had a U.S. profit of $1.2

million (QPAI) and a profit from the imported merchandise of $100,000. What is Maria's DPAD? Answer

Selected Answer:

$72,000

Response Feedback: $108,000 (9% x $1.2 million). The $100,000 profit from the imported goods is not QPAI.

Question 1

0 out of 1 points

Sarah and Emily form Red Corporation with the following investments: Sarah transfers computers worth

$200,000 (basis of $80,000), while Emily transfers real estate worth $180,000 (basis of $40,000) and

services (worth $20,000) rendered in organizing the corporation. Each is issued 600 shares in Red

Corporation. With respect to the transfers: Answer

Selected Answer:

Red Corporation has a basis of $60,000 in the real estate.

Response

Feedback: Sarah has no recognized gain and Emily recognizes income of $20,000 representing the stock

received for services rendered. Red Corporation has a basis of $80,000 in the computers and

$40,000 in the real estate. Emily has a basis of $60,000 in the stock [$40,000 (basis of real

estate) + $20,000 (income recognized from services rendered)].

Question 2

1 out of 1 points

Maria Corporation manufactures and sells ceramic dinnerware. The company also sells dinnerware that is

purchased from unrelated foreign producers. During the tax year 2010, Maria had a U.S. profit of $1.2

million (QPAI) and a profit from the imported merchandise of $100,000. What is Maria's DPAD? Answer

Selected Answer:

$108,000

Response Feedback: $108,000 (9% x $1.2 million). The $100,000 profit from the imported goods is not QPAI.

Question 3

1 out of 1 points




of: Answer

Selected Answer:

$20,000

Response



Question 4

0 out of 1 points


Selected Answer:

In the case of partnerships, guaranteed payments are not regarded as W-2 wages.

Response



Question 5

0 out of 1 points




Selected Answer:

None of the above

Response





Question 6

1 out of 1 points



$200,000. Answer

Selected Answer:


Response



Question 7

1 out of 1 points





Selected Answer:

$9,000


Question 8

1 out of 1 points

Yvonne Corporation manufactures and sells ceramic dinnerware. The company also sells dinnerware that is

purchased from unrelated foreign producers. During tax year 2010, Yvonne had a U. S. profit of $1.2 million

(QPAI) and a loss from the imported merchandise of $100,000. What is Yvonne's DPAD? Answer

Selected Answer:

$99,000

Response Feedback: $99,000 (9% x $1.1 million). The taxable income limitation applies.

Question 9

1 out of 1 points





Selected Answer:

None of the above

Response







Question 10

1 out of 1 points





Selected Answer:

$600


Question 1

1 out of 1 points

Sarah and Emily form Red Corporation with the following investments: Sarah transfers computers worth

$200,000 (basis of $80,000), while Emily transfers real estate worth $180,000 (basis of $40,000) and

services (worth $20,000) rendered in organizing the corporation. Each is issued 600 shares in Red

Corporation. With respect to the transfers: Answer

Selected Answer:

Emily has a basis of $60,000 in the shares of Red Corporation.

Response

Feedback: Sarah has no recognized gain and Emily recognizes income of $20,000 representing the stock

received for services rendered. Red Corporation has a basis of $80,000 in the computers and

$40,000 in the real estate. Emily has a basis of $60,000 in the stock [$40,000 (basis of real

estate) + $20,000 (income recognized from services rendered)].

Question 2

1 out of 1 points





Selected Answer:

$9,000


Question 3

1 out of 1 points

Which statement is false? Answer

Selected Answer:

In the case of a sole proprietor, the DPAD is a deduction from adjusted gross income.

Response Feedback: This is not a deduction from adjusted gross income for a sole proprietor.

Question 4

1 out of 1 points


Selected Answer:

None of the above

Response



Question 5

1 out of 1 points

Erica transfers land worth $500,000, basis of $100,000, to a newly formed corporation, Robin Corporation,

for all of Robin's stock, worth $300,000, and a 10-year note. The note was executed by Robin and made

payable to Erica in the amount of $200,000. As a result of the transfer: Answer

Selected Answer:

Robin Corporation has a basis of $300,000 in the land.

Response

Feedback: Erica has a recognized gain of $200,000 which is the amount of the boot she is treated as having

received through her receipt of the securities in Robin Corporation. The basis of the land to

Robin would be equal to the basis Erica had in the land, $100,000, plus the gain recognized by

Erica, $200,000, or $300,000.

Question 6

1 out of 1 points





Selected Answer:

None of the above

Response







Question 7

1 out of 1 points



$200,000. Answer

Selected Answer:


Response



Question 8

1 out of 1 points




Selected

Answer:

Section 351 may apply because stock need not be issued to Sarah and Tony in proportion to

the value of the property transferred.

Response





Question 9

1 out of 1 points





Selected Answer:

$600


Question 10

1 out of 1 points

Eve transfers property (basis of $120,000 and fair market value of $400,000) to Green Corporation for 80%

of its stock (worth $350,000) and a long-term note (worth $50,000), executed by Green Corporation and

made payable to Eve. As a result of the transfer: Answer

Selected Answer:

Eve recognizes a gain of $50,000.

Response Feedback: A long-term note is treated as “boot.” Thus, Eve is taxed on the value of the note received.

Question 1

0 out of 1 points

Crow Corporation has 800 shares of stock outstanding. Ted owns 300 shares, Ted's mother owns 100 shares,

Ted's sister owns 80 shares, and Ted's granddaughter owns 120 shares. Bluebird Corporation owns the

remaining 200 shares of stock in Crow. Ted owns 30% of the stock in Bluebird Corporation. In applying the

§ 318 stock attribution rules, how many shares does Ted own in Crow Corporation? Answer

Selected Answer:

300

Response

Feedback: Ted owns 520 shares, 300 shares directly and 220 shares constructively, in Crow Corporation.

Ted owns the shares of his mother (100 shares) and his granddaughter (120 shares). Ted is not

deemed to own the stock of his sister or Bluebird Corporation (in which he owns less than

50%).

Question 2

0 out of 1 points

Currently, Brown Corporation (E & P of $800,000) has 1,000 shares of common stock outstanding. Pat owns

300 shares. His wife owns 300 shares, his daughter owns 200 shares, and his father owns 200 shares. Two

years ago, Pat transferred $50,000 to Brown Corporation in exchange for 100 newly issued shares of

nonvoting preferred stock. In the current year, Brown Corporation redeems Pat's preferred stock for $60,000,

its fair market value. With respect to the distribution in redemption of the preferred stock: Answer

Selected Answer:

Pat has a long-term capital gain of $60,000.

Response

Feedback: As a result of the stock attribution rules, Pat owns 100% of the stock in Brown Corporation

before and after the redemption. Thus, the distribution does not satisfy any of the qualifying

stock redemption provisions. Instead, the entire distribution is taxed as dividend income. The

$50,000 basis in the preferred stock redeemed attaches to the basis of Pat's common stock.

Question 3

0 out of 1 points

Orange Corporation distributes property worth $300,000, basis of $340,000, to a shareholder in a distribution

that is a qualifying stock redemption. The property is subject to a liability of $110,000, which the

shareholder assumes. The basis of the property to the shareholder is: Answer

Selected Answer:

$230,000

Response

Feedback: The shareholder's basis in property received in a qualifying stock redemption is the fair

market value of the property.

Question 4

0 out of 1 points

Hazel, Emily, and Frank, unrelated individuals, own all of the stock in Wren Corporation (E & P of

$900,000) as follows: Hazel, 250 shares; Emily, 250 shares; and Frank, 1,000 shares. Wren redeems 400 of

Frank's shares (basis of $40,000) for $200,000. With respect to the distribution in redemption of the stock: Answer

Selected Answer:

Frank has dividend income of $160,000.

Response

Feedback: The distribution does not satisfy any of the qualifying stock redemption provisions and, as such,

is taxed as dividend income. Frank's ownership interest in Wren Corporation after the

redemption is 54.5% (600 shares owned after redemption ÷ 1,100 shares outstanding after

redemption). Since he continues to control Wren Corporation after the redemption, the

transaction fails both the not essentially equivalent redemption provision and the

disproportionate redemption provision. The $40,000 basis in the stock redeemed attaches to that

of Frank's remaining stock in Wren.

Question 5

1 out of 1 points

Hawk Corporation has 300 shares of stock outstanding: Marina owns 60 shares, Kent owns 90 shares, and

Tom owns 75 shares. Blackbird Partnership owns the remaining 75 shares of stock in Hawk Corporation.

Marina, Kent, and Tom, all unrelated, are equal partners of Blackbird Partnership. With respect to the stock

attribution rules under § 318: Answer

Selected Answer:

Marina owns, directly and indirectly, 85 shares in Hawk Corporation.

Response

Feedback: A partner is deemed to own stock held by the partnership in proportion to the partner's interest

in the partnership. Thus, Marina owns 85 shares in Hawk Corporation [60 shares directly plus

25 shares indirectly from Blackbird Partnership (1/3 ? 75 shares)]. Similarly, Kent owns 115

shares (90 shares directly plus 25 shares indirectly) and Tom owns 100 shares (75 shares

directly plus 25 shares indirectly) in Hawk Corporation. A partnership is deemed to own all of

the stock owned by its partners; thus, Blackbird Partnership owns all 300 shares in Hawk (75

shares directly plus 225 shares indirectly from the three partners).

Question 6

0 out of 1 points

Blue Corporation, a cash basis taxpayer, has taxable income of $700,000 for the current year. Blue elected

$80,000 of § 179 expense. It also had a related party loss of $30,000 and a realized (not recognized) gain

from an involuntary conversion of $85,000. It paid Federal income tax of $185,000 and a nondeductible fine

of $20,000. Blue's current E & P is: Answer

Selected Answer:

$630,000

Response

Feedback: Taxable income is reduced by Federal income tax paid, the related party loss, and the

nondeductible fine. Eighty percent of the § 179 expense is added back. Thus, $700,000 -

$185,000 - $30,000 - $20,000 + $64,000 = $529,000. The involuntary conversion has no effect

since realized gain was not recognized.

Question 7

1 out of 1 points

Brenda owns 900 shares of Eagle Corporation stock at a time when Eagle has 1,500 shares of stock

outstanding. The remaining shareholders are unrelated to Brenda. What is the minimum number of shares

Eagle must redeem from Brenda so that the transaction will qualify as a disproportionate redemption? Answer

Selected Answer:

347 shares

Response

Feedback: Before the redemption, Brenda owns 60% of the outstanding shares of Eagle stock. To qualify

as a disproportionate redemption, Brenda must own, after the redemption, less than 48% (80% ?

60%) of the remaining outstanding shares of Eagle stock. Using a simple algebraic formula, the

minimum number of shares (rounded up to the next whole number) that must be redeemed is

347 shares.

Question 8

0 out of 1 points

Pheasant Corporation ended its first year of operations with taxable income of $225,000. At the time of

Pheasant's formation, it incurred $50,000 of organizational expenses. In calculating its taxable income for

the year, Pheasant claimed an $8,000 deduction for the organizational expenses. What is Pheasant's current E

& P? Answer

Selected Answer:

$225,000

Response

Feedback: In determining E & P, there is no allowance for the amortization of organizational expenses.

Any such expense deducted when computing taxable income must be added back to determine

E & P. Consequently, Pheasant's E & P is $233,000 ($225,000 of current year E & P plus

$8,000 of organizational expenses).

Question 9

0 out of 1 points

Five years ago, Eleanor transferred property she had used in her sole proprietorship to Blue Corporation for

1,000 shares of Blue Corporation in a transaction that qualified under § 351. The assets had a tax basis to her

of $300,000 and a fair market value of $450,000 on the date of the transfer. In the current year, Blue

Corporation (E & P of $600,000) redeems 200 shares from Eleanor for $190,000 in a transaction that does

not qualify for sale or exchange treatment. With respect to the redemption, Eleanor will have a: Answer

Selected Answer:

$130,000 dividend

Response

Feedback: The transaction is treated as a return from her investment, and she has dividend income to

the extent of the entire distribution.

Question 10

0 out of 1 points

Kingbird Corporation (E & P of $800,000) has 1,000 shares of stock outstanding. That stock is held by

Amata (550 shares) and Esteban (450 shares), who are unrelated individuals. Kingbird redeems 200 of

Amata's shares for $1,000 per share. Amata paid $300 per share for her Kingbird stock nine years ago.

Which of the following statements is correct with respect to the stock redemption? Answer

Selected Answer:

Amata's basis in her remaining 350 shares is $60,000.

Response

Feedback: The transaction qualifies for sale or exchange treatment as a disproportionate redemption.

Amata's 43.8% (350 shares ÷ 800 shares) postredemption interest in Kingbird is less than both

80% of her preredemption interest [43.8% < 44% (80% ? 550 shares ÷ 1,000 shares) and 50%.

The stock was held for more than one year; thus, the result is a long-term capital gain of

$140,000 [$200,000 (amount realized) - $60,000 (basis of 200 shares redeemed)]. The basis of

Amata's remaining shares is $105,000 (350 shares ? $300). The reduction in Kingbird's E & P

as a result of the qualifying stock redemption is limited to $160,000 [20% (percentage of shares

outstanding redeemed)? $800,000 (E & P at time of redemption)].

Question 1

0 out of 1 points




Selected Answer:

None of the above

Response








Question 2

0 out of 1 points

Tracy and Lance, equal shareholders in Macaw Corporation, receive $250,000 each in distributions on

December 31 of the current year. During the current year, Macaw sold an appreciated asset for $500,000

(basis of $150,000). Payment for the sale of the asset will be made as follows: 50% next year and 50% in the

following year, with interest payable at a rate of 7.5%. Before considering the effect of the asset sale,

Macaw's current year E & P is $400,000 and it has no accumulated E & P. How much of Tracy's distribution

will be taxed as a dividend? Answer

Selected Answer:

$200,000

Response

Feedback: Accounting methods used for determining E & P are generally more conservative than those

allowed for calculating income tax. As a consequence, the installment method is not permitted

for E & P purposes. Thus, an adjustment is required for the deferred gain from property sales

made during the year. All principal payments are treated as having been received in the year of

the sale. Macaw's E & P of $400,000 in the current year is thereby increased by the $350,000 of

gain on the sale. Since Macaw now has $750,000 of E & P ($400,000 of current E & P plus

$350,000 of deferred gain), Tracy's entire distribution of $250,000 is a dividend.

Question 3

1 out of 1 points





Selected Answer:

$529,000

Response





Question 4

0 out of 1 points

Which of the following statements is incorrect with respect to determining current E & P? Answer

Selected

Answer:

Charitable contributions in excess of the 10% of taxable income limit should be subtracted

from taxable income.

Response

Feedback: All the adjustments are correct. Tax-exempt income and Federal income tax refunds are added

to taxable income because they increase the company's capacity to pay a dividend (choices a.

and d.). The dividends received deduction is added back because it does not represent a

reduction in the company's assets available for distribution (choice b.). Finally, disallowed

charitable contributions decrease the corporation's ability to make distributions to shareholders,

so they reduce E & P (choice c.).

Question 5

0 out of 1 points

Cardinal Corporation has 1,000 shares of common stock outstanding. John owns 400 of the shares, John's

father owns 300 shares, John's daughter owns 200 shares, and Redbird Corporation owns 100 shares. John

owns 70% of the stock in Redbird Corporation. How many shares is John deemed to own in Cardinal

Corporation under the attribution rules of § 318? Answer

Selected Answer:

1,000

Response

Feedback: John is deemed to own the shares of his father, his daughter, and since he is a 50% or greater

shareholder in Redbird, a proportionate number of shares owned by Redbird. Thus, John is

deemed to own 970 shares: his 400 shares plus his father's 300 shares plus his daughter's 200

shares plus 70 of Redbird's shares [100 (shares owned by Redbird)? 70% (John's ownership

interest in Redbird)].

Question 6

1 out of 1 points

On January 2, 2010, Orange Corporation purchased equipment for $300,000 with an ADS recovery period of

10 years and a MACRS useful life of 7 years. Section 179 was not elected. MACRS depreciation properly

claimed on the asset, including depreciation in the year of sale, totaled $79,605. The equipment was sold on

July 1, 2011, for $290,000. As a result of the sale, the adjustment to taxable income needed to arrive at

current E & P is: Answer

Selected Answer:

Decrease $49,605

Response

Feedback: Gain on sale of the equipment for purposes of determining taxable income is $69,605, computed

as follows: $290,000 (selling price) - $220,395 (adjusted basis). The adjusted basis is

determined by subtracting the MACRS depreciation ($79,605) from the cost of $300,000. For

purposes of computing E & P, the gain is $20,000 [$290,000 (selling price) - $270,000 (E & P

adjusted basis)]. For E & P purposes, depreciation is computed using the straight-line method

over 10 years, with the half-year convention. Thus, the corporation deducts $30,000 annually

for depreciation ($300,000 ÷ 10 years). In the years of purchase and sale, the company deducts

1/2 year of depreciation, or $15,000 per year. Therefore, total E & P depreciation is $30,000 and

the adjusted basis for E & P purposes is $270,000 [$300,000 (cost) - $30,000 (depreciation)].

The adjustment to taxable income to account for the difference in gain for tax and E & P

purposes is a decrease in taxable income of $49,605 [$20,000 (E & P gain) - $69,605 (taxable

gain)].

Question 7

1 out of 1 points





Selected Answer:

Amata has a long-term capital gain of $140,000.

Response









Question 8

1 out of 1 points





Selected Answer:


Response








Question 9

1 out of 1 points






Selected Answer:

$190,000 dividend

Response



Question 10

1 out of 1 points




Selected Answer:

347 shares

Response





347 shares.

Question 1

1 out of 1 points





Selected Answer:

$529,000

Response





Question 2

0 out of 1 points




Selected Answer:

Frank has a capital gain of $160,000.

Response








Question 3

1 out of 1 points




Selected Answer:

347 shares

Response





347 shares.

Question 4

1 out of 1 points




& P? Answer

Selected Answer:

$233,000

Response





Question 5

1 out of 1 points





Selected Answer:

None of the above

Response






Question 6

1 out of 1 points






Selected Answer:

$190,000 dividend

Response



Question 7

1 out of 1 points





Selected Answer:

520

Response




50%).

Question 8

1 out of 1 points





Selected Answer:


Response









Question 9

0 out of 1 points

The tax treatment of corporate distributions at the shareholder level does not depend on: Answer

Selected Answer:

None of the above

Response

Feedback: While the character of distributed property can impact the tax treatment of gain recognized by

the corporation, it will have no impact on the shareholder.

Question 10

0 out of 1 points


Selected Answer:

Federal income tax refunds should be added back to taxable income.

Response







Question 1

1 out of 1 points





Selected Answer:


Response








Question 2

1 out of 1 points







Selected Answer:

$250,000

Response








Question 3

1 out of 1 points






Selected Answer:

Decrease $49,605

Response












gain)].

Question 4

1 out of 1 points






Selected Answer:

$190,000 dividend

Response



Question 5

1 out of 1 points





Selected Answer:

520

Response




50%).

Question 6

1 out of 1 points





Selected Answer:


Response









Question 7

1 out of 1 points




& P? Answer

Selected Answer:

$233,000

Response





Question 8

1 out of 1 points


Selected Answer:

None of the above statements are incorrect.

Response







Question 9

0 out of 1 points


Selected Answer:

The basis of stock in the hands of the shareholder

Response



Question 10

1 out of 1 points





Selected Answer:

$529,000

Response Taxable income is reduced by Federal income tax paid, the related party loss, and the

Feedback: nondeductible fine. Eighty percent of the § 179 expense is added back. Thus, $700,000 -



Question 1

1 out of 1 points




Selected Answer:

347 shares

Response





347 shares.

Question 2

1 out of 1 points





Selected Answer:

520

Response




50%).

Question 3

0 out of 1 points


Selected Answer:

Dividends received deductions should be added back to taxable income.

Response







Question 4

0 out of 1 points


Selected Answer:

Whether the distributed property is received by an individual or a corporation

Response



Question 5

1 out of 1 points





Selected Answer:


Response









Question 6

1 out of 1 points







Selected Answer:

$250,000

Response








Question 7

1 out of 1 points





Selected Answer:

None of the above

Response






Question 8

1 out of 1 points





Selected Answer:


Response








Question 9

1 out of 1 points




Selected Answer:


Response








Question 10

1 out of 1 points






Selected Answer:

Decrease $49,605

Response Gain on sale of the equipment for purposes of determining taxable income is $69,605, computed

Feedback: as follows: $290,000 (selling price) - $220,395 (adjusted basis). The adjusted basis is










gain)].

Question 1

1 out of 1 points





Selected Answer:

$529,000

Response





Question 2

1 out of 1 points





Selected Answer:


Response









Question 3

1 out of 1 points




Selected Answer:

347 shares

Response





347 shares.

Question 4

1 out of 1 points




Selected Answer:


Response








Question 5

1 out of 1 points







Selected Answer:

$250,000

Response








Question 6

1 out of 1 points





Selected Answer:


Response








Question 7

1 out of 1 points






Selected Answer:

$190,000 dividend

Response



Question 8

1 out of 1 points





Selected Answer:

None of the above

Response






Question 9

1 out of 1 points






Selected Answer:

Decrease $49,605

Response












gain)].

Question 10

1 out of 1 points




& P? Answer

Selected Answer:

$233,000

Response





Question 1

0 out of 1 points

Which of the following is false regarding a "Type A" reorganization? Answer

Selected

Answer:

Generally, the dissenting shareholders of the target may have their shares appraised and

bought outright if they so desire.

Response

Feedback: The acquiring corporation must assume all the liabilities of the target corporation as a

matter of law.

Question 2

1 out of 1 points

Silver Corporation redeems all of Alluvia's 3,000 shares and distributes to her 1,000 shares of Gold

Corporation stock plus $20,000 cash. Alluvia's basis in her 30% interest in Silver is $80,000 and the stock's

market value is $120,000. At the time Silver is acquired by Gold, the accumulated earnings and profits of

Silver are $100,000 and Gold's are $50,000. How does Alluvia treat this transaction for tax purposes? Answer

Selected Answer:

Alluvia reports a $20,000 recognized dividend.

Response

Feedback: Alluvia has a realized gain of $40,000 ($120,000 - $80,000) and a recognized dividend of

$20,000. Her proportionate share of Silver Corporation's accumulated earnings and profits is in

excess of $20,000 ($100,000 x 30% = $30,000).

Question 3

1 out of 1 points

Staff, Inc., has taxable income of $10 million in 2010. What is the maximum DPAD tax savings for this C

corporation? Answer

Selected Answer:

$306,000

Response Feedback: $10 million x 9% x 34% = $306,000.

Question 4

0 out of 1 points

Beige Corporation (a calendar year taxpayer) has taxable income of $150,000, and its financial records

reflect the following for the year. Federal income taxes paid $75,000

Net operating loss carryforward deducted currently $35,000

Gain recognized this year on an installment sale from a prior year $22,000

Depreciation deducted on tax return (ADS depreciation would have been $5,000) $20,000

Interest income on Iowa state bonds $4,000

Beige Corporation's current E & P is: Answer

Selected Answer:

$77,000

Response

Feedback: To determine E & P, the Federal income tax is subtracted from taxable income and the net

operating loss carryforward is added. The gain recognized currently from the prior year's

installment sale is subtracted. The excess of depreciation deducted on the tax return over ADS

depreciation and the interest from Iowa state bonds are added.

Question 5

0 out of 1 points

One of the tenets of U.S. tax policy is to encourage business development. Which of the following Code

sections does not support this tenet? Answer

Selected Answer:

All of the above provisions support the tenet.

Response Feedback: Like-kind exchange rules do not apply to exchanges of corporate stock.

Question 6

0 out of 1 points

Red Corporation, a calendar year taxpayer, has taxable income of $600,000. Among its transactions for the

year are the following: Collection of proceeds from insurance policy on life of corporate officer (in excess of cash surrender value)$10,000

Realized gain (not recognized) on an involuntary conversion $5,000

Nondeductible fines and penalties $35,000

Disregarding any provision for Federal income taxes, Red Corporation's current E & P is: Answer

Selected Answer:

$565,000

Response

Feedback: To taxable income, the proceeds from insurance policy on life of corporate officer (in excess of

cash surrender value) is added and the nondeductible fines and penalties are subtracted. The

realized gain (not recognized) on the involuntary conversion has no effect on E & P.

Question 7

0 out of 1 points

Target Corporation is merging into Acquiring Corporation under state law requirements. Target has 3,000

shares outstanding, with a value of $100 per share. Joey, one of Target's shareholders, exchanges his 500

Target shares, for which he paid $80 per share, for 1,000 shares of Crow stock, valued at $30 per share, and

$5,000 cash. Acquiring owns 40% of Crow stock. How does Joey treat this transaction for tax purposes? Answer

Selected Answer:

Joey recognizes no gain or loss.

Response

Feedback: This is a taxable transaction because Joey received no stock in Acquiring in exchange for his

stock in Target. Acquiring's ownership of Crow is an investment. Thus, Crow is not a party to

the reorganization. 500 x $80 = $40,000 basis - $30,000 Crow stock - $5,000 cash = $5,000 loss

for Joey.

Question 8

0 out of 1 points

Which, if any, of the following is a characteristic of the DPAD? Answer

Selected Answer:

Applicable only to manufactured goods that are exported from the U.S

Response

Feedback: As long as the domestic portion of the production is substantial, DPGR results (choice d. ).

DPAD applies to most entities including S corporations (choice a. ). Not only can DPGR result

from the performance of engineering and architectural services, but certain embedded services

can qualify (choice c.). There are no restrictions or requirements on where the manufactured

goods have to be sent or sold (choice b. ).

Question 9

1 out of 1 points

Gabriella and Juanita form Luster Corporation. Gabriella transfers cash of $50,000 for 50 shares of stock,

while Juanita transfers a secret process (basis of zero and fair market value of $50,000) for 50 shares of

stock. Answer

Selected Answer:

Neither Gabriella nor Juanita will recognize gain on the transfer.

Response

Feedback: The transfers are nontaxable to both Gariella and Juanita. Each of them qualifies as a property

transferor and together control the corporation. Therefore, the transfer is subject to tax deferred

treatment under § 351.

Question 10

1 out of 1 points

Yellow Corporation and Green Corporation enter into a "Type A" reorganization. Raul currently holds a 15-

year $100,000 Green bond paying 6% interest. In exchange for his Green bond, Raul receives a 5-year

$125,000 Yellow bond paying 5% interest. Raul is happy with the Yellow bond because, even though it pays

a lower interest rate, the yield provides slightly more interest than the Green bond, and both bonds mature on

the same date. How does Raul treat this transaction on his tax return? Answer

Selected Answer:

Raul recognizes gain of $25,000 on the exchange ($125,000 - $100,000).

Response

Feedback: Raul recognizes gain to the extent that the principal amounts of the bonds received are in

excess of the bonds given up, or $25,000.

Question 11

0 out of 1 points

Norma formed Hyacinth Enterprises, a proprietorship, in 2010. In its first year, Hyacinth had operating

income of $200,000 and operating expenses of $100,000. In addition, Hyacinth had a long-term capital loss

of $9,000. Norma, the proprietor of Hyacinth Enterprises, withdrew $50,000 from Hyacinth during the year.

Assuming Norma has no other capital gains or losses, how does this information affect her taxable income

for 2010? Answer

Selected

Answer:

Increases Norma's taxable income by $41,000 ($50,000 ordinary business income - $9,000

long-term capital loss)

Response

Feedback: A proprietorship is not a separate taxable entity. As a proprietor, Norma reports profit or loss

from Hyacinth on her individual return. Norma's taxable income for 2010 will be increased by

$97,000 ($200,000 - $100,000 = $100,000 net ordinary business income - $3,000 capital loss

deduction). The $50,000 she withdrew from Hyacinth has no effect on her taxable income.

Question 12

0 out of 1 points

Which of the following statements regarding "Type B" reorganizations is true? Answer

Selected

Answer:

Since the shareholders of the target are likely to have greater than a 50 percentage point

ownership change, the § 382 limitation usually apply to "Type B" reorganizations.

Response

Feedback: "Type B" reorganizations are considered to be simple rather than complicated (choice a. ).

There is no acquisition of liabilities in a "Type B" reorganization (choice c.). Since the target

corporation continues, there is no acquisition of its loss attributes (choice d. ).

Question 13

0 out of 1 points

Which of the following is not a reorganization designated under § 368(a)(1)? Answer

Selected Answer:

Transfers due to a bankruptcy or receivership proceeding

Response Feedback: Answer (a) is a "Type G," b. is a "Type E," c. is a divisive "Type D," d. is a "Type B. "

Question 14

1 out of 1 points

Domingo and Juan, brothers, each own 300 shares in White Corporation (E & P of $700,000). Heron

Partnership owns the remaining 400 shares of stock in White Corporation, and Juan has a 25% interest in

Heron Partnership. White Corporation redeems 200 shares of Juan's stock for $120,000. Juan paid $150 a

share for the stock five years ago. With respect to the redemption: Answer

Selected Answer:

Juan has a long-term capital gain of $90,000.

Response

Feedback: The redemption meets both tests of § 302(b)(2) and qualifies for sale or exchange treatment.

Before and after the redemption, Juan is deemed to own a proportionate number of the White

shares owned by Heron Partnership, but none of the shares owned by Domingo. (The family

attribution rules do not include siblings.) Thus, before the redemption, Juan has a 40% interest

in White: 300 shares directly plus 100 shares indirectly from Heron (25% x 400). After the

redemption, Juan owns 25% of the stock in White Corporation: [200 shares (100 directly plus

100 indirectly from Heron) x 800 postredemption shares outstanding]. The 25% ownership

interest is less than 50% of the total voting power and less than 80% of Juan's original

ownership [25% is less than 32% (80% x 40%)]. Thus, the distribution is a disproportionate

redemption and Juan has a long-term capital gain of $90,000 [$120,000 (amount realized) -

$30,000 (stock basis)].

Question 15

0 out of 1 points

Gravity Corporation creates Earth Corporation. It transfers most of its assets (net value $900,000) to Earth.

At approximately the same time, Magnet Corporation also transfers all of its assets (net value $90,000) to

Earth. Gravity liquidates by transferring its remaining assets, $100,000 cash and 1,000 shares of Earth, to its

sole shareholder, Zia, in exchange for all of her Gravity stock. Zia's basis in her Gravity stock was $300,000.

Magnet liquidates by transferring 100 shares of Earth to its sole shareholder, Amos, in exchange for all of his

Magnet stock. Amos's basis in his Magnet stock was $150,000. How will this transaction be treated for tax

purposes? Answer

Selected

Answer:

This qualifies as a "Type C" reorganization. Zia recognizes $100,000 gain, Gravity also

recognizes $100,000 gain, but Amos will not recognize his loss.

Response

Feedback: With "Type A" consolidations, the stock exchanged can be common or preferred. The

continuity of interest requirement is met.

Question 16

0 out of 1 points

Perry owns 80% of Weed Corporation and Aimee owns the other 20%. In exchange for all of the Weed

stock, Perry receives 3,400 shares of Grass Corporation common stock (value $70,000), and Aimee receives

50 shares of Grass preferred (value $20,000). Perry also receives $10,000 in bonds. The exchange qualifies

as what type of transaction? Answer

Selected Answer:

Acquisitive "Type D" reorganization

Response

Feedback: The exchange qualifies as a "Type A" reorganization. Preferred stock can be used in a "Type A"

reorganization to meet the continuity of interest test. Perry received more than 50% of the

consideration in the form of stock. He recognizes gain to the extent of the bond received

($10,000).

Question 17

0 out of 1 points

Which provision could best be justified as encouraging small business? Answer

Selected Answer:

Percentage depletion

Response Feedback: The S corporation was designed to encourage small business growth.

Question 18

0 out of 1 points

A shareholder bought 2,000 shares of Zee Corporation for $90,000 several years ago. When the stock is

valued at $200,000, Zee redeems these shares in exchange for 6,000 shares of Yea Corporation stock. This

transaction meets the requirements of § 368. Which of the following statements is true with regard to this

transaction? Answer

Selected Answer:

Gain or loss cannot be determined because the value of the Yea stock is not given.

Response

Feedback: No gain or loss is recognized on the transaction; therefore, the realized gain of $110,000 is

postponed.

Question 19

1 out of 1 points

All of the following statements are true about gains recognized in a corporate reorganization except: Answer

Selected

Answer:

Corporate shareholders would prefer taxable amounts in a reorganization be classified as a

capital gain.

Response Feedback: Corporations prefer dividend treatment because of the dividends received deduction.

Question 20

0 out of 1 points

Flycatcher Corporation, a C corporation, has two equal individual shareholders, Nancy and Pasqual. In the

current year, Flycatcher earned $200,000 net profit and paid a dividend of $40,000 to each shareholder.

Regardless of any tax consequences resulting from their interests in Flycatcher, Nancy is in the 28%

marginal tax bracket and Pasqual is in the 35% marginal tax bracket. With respect to the current year, which

of the following statements is incorrect? Answer

Selected Answer:

Flycatcher pays corporate tax on $200,000.

Response

Feedback: Dividend distributions are not deductible by a corporation; thus, Flycatcher still incurs

corporate tax on $200,000 even if all profits were distributed to shareholders. A preferential tax

rate of 15% applies to the dividends for both shareholders, resulting in additional tax of $6,000

($40,000 x 15%) for each.

Question 1

1 out of 1 points






Selected Answer:

$575,000

Response




Question 2

1 out of 1 points


Selected Answer:

S corporation election


Question 3

1 out of 1 points


Selected

Answer:

The acquiring corporation assumes only those liabilities of the target corporation that are

associated with assets.

Response


matter of law.

Question 4

1 out of 1 points





for 2010? Answer

Selected

Answer:



Response





Question 5

1 out of 1 points


corporation? Answer

Selected Answer:

$306,000


Question 6

1 out of 1 points


Selected Answer:

All of the above are reorganizations listed in § 368(a)(1)


Question 7

1 out of 1 points






Selected

Answer:

Flycatcher can avoid the corporate tax altogether by paying out all $200,000 of net profit as

dividends to the shareholders.

Response




($40,000 x 15%) for each.

Question 8

0 out of 1 points








Selected Answer:

None of the above

Response





Question 9

0 out of 1 points

Carlos purchased 20% of Target Corporation's stock five years ago for $50,000. In a transaction qualifying

as a "Type A" reorganization, Carlos received $40,000 cash and 6% of Acquiring Corporation's stock

(valued at $60,000) in exchange for his Target stock. Target had $300,000 accumulated earnings and profits

prior to the reorganization. How does Carlos treat the exchange for tax purposes? Answer

Selected Answer:

As a sale of stock and recognizes a $10,000 long-term capital loss

Response

Feedback: If Carlos had received only stock, he would have received 10% of Acquiring. Since Carlos

owns 6% of Acquiring, which is less than 80% of the stock he would have owned (6% ÷ 10% is

less than 80%), and he owns less than 50% of Acquiring, he meets the § 302(b)(2)

qualifications for redemption treatment.

Question 10

1 out of 1 points





Selected Answer:


Response



excess of $20,000 ($100,000 x 30% = $30,000).

Question 11

1 out of 1 points


Selected

Answer:

The requirement that only voting stock may be used as consideration in a "Type B"

reorganization by the acquiring corporation is a distinct disadvantage.

Response




Question 12

1 out of 1 points



Selected Answer:

Section 1031, which allows the exchange of stock of one corporation for stock of another


Question 13

0 out of 1 points

Which of the following is an incorrect statement regarding the application of the § 318 stock attribution

rules? Answer

Selected

Answer:

An individual is deemed to own the shares owned by his or her spouse, children,

grandchildren, or parents.

Response

Feedback: All of the statements are correct with respect to the application of the § 318 attribution

rules.

Question 14

1 out of 1 points


Selected

Answer:


capital gain.


Question 15

1 out of 1 points



stock. Answer

Selected Answer:


Response




Question 16

1 out of 1 points






Selected Answer:


Response



Question 17

0 out of 1 points


Selected Answer:

None of the above

Response






Question 18

1 out of 1 points





Selected Answer:


Response












Question 19

1 out of 1 points





Selected Answer:

"Type A" reorganization

Response




($10,000).

Question 20

1 out of 1 points





Selected Answer:

Joey has a recognized loss of $5,000.

Response




for Joey.

Question 1

1 out of 1 points






Selected

Answer:



Response




($40,000 x 15%) for each.

Question 2

1 out of 1 points



stock. Answer

Selected Answer:


Response




Question 3

1 out of 1 points






Selected Answer:


Response



Question 4

1 out of 1 points


Selected

Answer:


capital gain.


Question 5

1 out of 1 points


Selected

Answer:



Response




Question 6

0 out of 1 points

Jupiter Corporation acquires all of Titian Corporation's stock in exchange for its voting stock. Iris received

1,000 shares of Jupiter valued at $50,000 for her 8,000 shares of Titian that cost Iris $100,000 five years ago.

In addition to the Jupiter stock, she receives a $30,000 bond. How does Iris treat this transaction for tax

purposes? Answer

Selected Answer:

Iris recognizes a loss of $20,000. Her Jupiter stock basis is $80,000.

Response

Feedback: Iris has a realized loss of $20,000; however, losses are not recognized in reorganizations. Her

basis in her Jupiter stock will be $70,000 ($100,000 - $30,000 bond received).

Question 7

1 out of 1 points


corporation? Answer

Selected Answer:

$306,000


Question 8

1 out of 1 points






Selected Answer:

$575,000

Response




Question 9

1 out of 1 points





for 2010? Answer

Selected

Answer:



Response





Question 10

0 out of 1 points


Selected Answer:

Not applicable in situations involving S corporations

Response






Question 11

1 out of 1 points


Selected Answer:



Question 12

1 out of 1 points


Selected Answer:



Question 13

1 out of 1 points





Selected Answer:


Response




($10,000).

Question 14

1 out of 1 points





Selected Answer:


Response












Question 15

1 out of 1 points





Selected Answer:

As a stock redemption and recognizes a $40,000 long-term capital gain

Response





Question 16

0 out of 1 points

Cardinal Corporation redeems all of its voting common stock. Cardinal then exchanges this redeemed stock

with Wren corporation for 40% of Wren's voting common and nonvoting preferred stock. The Wren stock

was distributed to the Cardinal shareholders. After the transaction, both Cardinal and Wren corporations still

exist. The former Cardinal shareholders are now shareholders of Wren. This transaction qualifies as a(n): Answer

Selected Answer:

"Type C" reorganization

Response

Feedback: This does not qualify as a "Type B" reorganization because Wren used preferred stock as well

as voting stock in the exchange. The acquiring corporation can use only voting stock. For the

other types of reorganizations, assets of one of the corporations would have to be transferred to

the other.

Question 17

1 out of 1 points





Selected Answer:


Response



excess of $20,000 ($100,000 x 30% = $30,000).

Question 18

0 out of 1 points

Xian Corporation and Win Corporation would like to combine into one entity. Xian exchanges 40% of its

common and preferred stock plus $200,000 cash for 60% of Win's assets and liabilities. Win distributes the

Xian stock, cash, unwanted assets, and liabilities to its shareholders in exchange for their outstanding stock.

Win then liquidates. Answer

Selected Answer:

This restructuring will qualify as a "Type B" reorganization.

Response

Feedback: This restructuring does not qualify as a "Type A" statutory merger because all of the Win

liabilities were not transferred to Xian. A stock for stock exchange is necessary for a "Type B"

reorganization, which was not the case here. The transaction does not qualify as a "Type C"

reorganization because at least 80% of Win's assets are not obtained with voting stock. The

restructuring is not an acquisitive "Type D" reorganization because Xian is transferring stock to

Win, not assets. Therefore, this transaction is not one of the reorganizations provided in § 368.

Question 19

1 out of 1 points



Selected Answer:



Question 20

1 out of 1 points


Selected

Answer:



Response


matter of law.

Question 1

1 out of 1 points


Selected

Answer:



Response


matter of law.

Question 2

1 out of 1 points



stock. Answer

Selected Answer:


Response




Question 3

1 out of 1 points





Selected Answer:


Response





Question 4

1 out of 1 points


Selected

Answer:



Response




Question 5

0 out of 1 points





Selected Answer:


Response




the other.

Question 6

1 out of 1 points




purposes? Answer

Selected Answer:

None of the above

Response



Question 7

1 out of 1 points





Selected Answer:


Response



excess of $20,000 ($100,000 x 30% = $30,000).

Question 8

1 out of 1 points








Selected Answer:

$107,000

Response





Question 9

1 out of 1 points





Selected Answer:


Response












Question 10

1 out of 1 points





Selected Answer:

This does not qualify as a reorganization under § 368.

Response







Question 11

1 out of 1 points


Selected Answer:



Question 12

1 out of 1 points



Selected Answer:



Question 13

1 out of 1 points





for 2010? Answer

Selected

Answer:



Response





Question 14

1 out of 1 points


Selected

Answer:

Can sometimes apply when some of the components of a product are manufactured in foreign

countries

Response






Question 15

1 out of 1 points






Selected

Answer:



Response




($40,000 x 15%) for each.

Question 16

1 out of 1 points





Selected Answer:


Response




($10,000).

Question 17

1 out of 1 points




transaction? Answer

Selected Answer:

The shareholder has a postponed gain of $110,000.

Response


postponed.

Question 18

1 out of 1 points


corporation? Answer

Selected Answer:

$306,000


Question 19

1 out of 1 points






Selected Answer:


Response



Question 20

1 out of 1 points


Selected Answer:



Question 1

1 out of 1 points





Selected Answer:


Response



excess of $20,000 ($100,000 x 30% = $30,000).

Question 2

1 out of 1 points


Selected Answer:



Question 3

1 out of 1 points


Selected

Answer:



Response


matter of law.

Question 4

1 out of 1 points








Selected Answer:

$107,000

Response





Question 5

1 out of 1 points


Selected

Answer:


capital gain.


Question 6

1 out of 1 points




transaction? Answer

Selected Answer:


Response


postponed.

Question 7

1 out of 1 points





Selected Answer:


Response












Question 8

0 out of 1 points





Selected Answer:

Acquisitive "Type D" reorganization

Response




the other.

Question 9

1 out of 1 points


Selected Answer:



Question 10

1 out of 1 points





for 2010? Answer

Selected

Answer:



Response





Question 11

1 out of 1 points






Selected Answer:

$575,000

Response




Question 12

1 out of 1 points


Selected

Answer:


countries

Response






Question 13

1 out of 1 points






Selected Answer:


Response



Question 14

1 out of 1 points




purposes? Answer

Selected Answer:

None of the above

Response



Question 15

1 out of 1 points


rules? Answer

Selected Answer:

None of the above.

Response


rules.

Question 16

1 out of 1 points






Selected

Answer:



Response




($40,000 x 15%) for each.

Question 17

1 out of 1 points





Selected Answer:


Response





Question 18

1 out of 1 points





Selected Answer:


Response







Question 19

1 out of 1 points


corporation? Answer

Selected Answer:

$306,000


Question 20

1 out of 1 points







purposes? Answer

Selected

Answer:

This qualifies as a "Type A" reorganization. Zia recognizes $100,000 gain, but Amos will not

recognize any loss.

Response



Question 1

1 out of 1 points



Selected Answer:



Question 2

1 out of 1 points







purposes? Answer

Selected

Answer:

This qualifies as a "Type A" reorganization. Zia recognizes $100,000 gain, but Amos will not

recognize any loss.

Response



Question 3

1 out of 1 points


Selected Answer:



Question 4

1 out of 1 points


rules? Answer

Selected Answer:

None of the above.

Response


rules.

Question 5

1 out of 1 points




purposes? Answer

Selected Answer:

None of the above

Response



Question 6

1 out of 1 points




transaction? Answer

Selected Answer:


Response


postponed.

Question 7

1 out of 1 points





Selected Answer:


Response







Question 8

1 out of 1 points





for 2010? Answer

Selected

Answer:



Response





Question 9

1 out of 1 points





Selected Answer:


Response












Question 10

1 out of 1 points








Selected Answer:

$107,000

Response





Question 11

1 out of 1 points


Selected Answer:



Question 12

1 out of 1 points


Selected

Answer:


countries

Response






Question 13

1 out of 1 points


Selected

Answer:


capital gain.


Question 14

1 out of 1 points






Selected Answer:


Response



Question 15

1 out of 1 points





Selected Answer:


Response





Question 16

1 out of 1 points


Selected

Answer:



Response


matter of law.

Question 17

1 out of 1 points






Selected Answer:

$575,000

Response




Question 18

1 out of 1 points





Selected Answer:


Response



excess of $20,000 ($100,000 x 30% = $30,000).

Question 19

1 out of 1 points





Selected Answer:

Taxable event

Response




the other.

Question 20

1 out of 1 points





Selected Answer:

Joey has a recognized loss of $5,000.

Response




for Joey.

Question 1

0 out of 1 points

ParentCo owned 100% of SubCo for the entire year. ParentCo uses the accrual method of tax accounting,

whereas SubCo uses the cash method. During the year, SubCo sold raw materials to ParentCo for $35,000

under a contract that requires no payment to SubCo until the following year.

Exclusive of this transaction, ParentCo had income for the year of $80,000, and SubCo had income of

$50,000. The group's consolidated taxable income for the year was: Answer

Selected Answer:

$95,000

Response

Feedback: Since SubCo uses the cash method of accounting, it will not recognize the $35,000 of income

for the materials sold to ParentCo until the next tax period (when payment is received).

ParentCo's related deduction must also be deferred until the later year. The group's consolidated

taxable income is $130,000, the sum of ParentCo's and SubCo's separate incomes.

Question 2

0 out of 1 points

ParentCo purchased all of the stock of SubCo on January 2, 2009, and the two companies filed consolidated

returns for 2009 and thereafter. Both entities were incorporated in 2008. Taxable income computations for

the members include the following. Neither group member incurred any capital gain or loss transactions

during these years, nor did they make any charitable contributions. No § 382 limit applies. 2008 ParentCo's Taxable Income $100,000 and SubCo's Taxable Income ($75,000) and Consolidated Taxable Income N/A.

2009 ParentCo's Taxable Income $100,000 and SubCo's Taxable Income ($40,000) and Consolidated Taxable Income $60,000.

2010 ParentCo's Taxable Income $100,000 and SubCo's Taxable Income $20,000 and Consolidated Taxable Income ?


To what extent can SubCo's 2008 losses be used by the group in 2011? Answer

Selected Answer:

$125,000

Response

Feedback: The $40,000 2009 loss is absorbed in the current year against ParentCo's income. Because the

2008 loss arose in a separate return year, its use as a deduction against group income is limited

to the lesser of SubCo's current-year or cumulative positive contribution to consolidated taxable

income. For 2009 and 2010, this amount is less than zero.

After 2011, SubCo's cumulative contribution to consolidated taxable income was $105,000 =

$40,000 loss for 2009 + 2010's $20,000 income + 2011's income of $125,000. Thus, all of the

2008 separate return year $75,000 loss is applied against 2011 income.

Question 3

1 out of 1 points

ParentCo purchased all of the stock of SubCo on January 1, 2009, for $500,000. SubCo produced a loss for

2009 of $150,000 and distributed cash of $25,000 to ParentCo. In 2010, SubCo generated a loss of $750,000;

in 2011, it recognized net income of $45,000. What is ParentCo's capital gain or loss if it sells all of its

SubCo stock to a nongroup member on January 1, 2012, for $50,000? Answer

Selected Answer:

$430,000

Response

Feedback: When accumulated deficits in the subsidiary's post-acquisition earnings and profits exceed the

acquisition price, an excess loss account is created to permit the group to recognize current

subsidiary losses while avoiding a negative stock basis. If the subsidiary stock is sold to a

nongroup member, the balance of the excess loss account is recognized as capital gain income

by the seller.

Question 4

1 out of 1 points

Alb, Bud, and Coe constitute an affiliated group of corporations. Which of the following tax effects becomes

more restrictive if an election is made to file on a consolidated basis? Answer

Selected Answer:

Choice of members' tax year ends

Response

Feedback: The others are treated alike even if no election to consolidate is made, because the

controlled group rules apply.

Question 5

0 out of 1 points

The consolidated net operating loss of Parent includes all of the following except: Answer

Selected Answer:

Parent's portfolio income

Response Feedback: The charitable deduction has its own carryover period.

Question 6

0 out of 1 points

The Philstrom consolidated group reported the following taxable income amounts. Parent owns all of the

stock of both Junior and Minor. Determine the net operating loss (NOL) that is apportioned to Minor.

Parent($600,000) and Junior ($400,000) and Minor $100,000 Answer

Selected Answer:

$0. All NOLs of a consolidated group are apportioned to the parent.

Response Feedback: Only members with separate NOLs are apportioned any of the consolidated NOL.

Question 7

0 out of 1 points

How do the members of a consolidated group split among themselves the benefits of the lower tax brackets

on the first $75,000 of taxable income? Answer

Selected

Answer:

According to an internal tax-sharing agreement, which may be modified by the IRS upon

audit

Response Feedback: This agreement is respected by the government if all group members agree to it in writing.

Question 8

0 out of 1 points

How are the members of a Federal consolidated group affected by computations related to E & P? Answer

Selected Answer:

E & P is computed solely on a consolidated basis.

Response Feedback: There is no such concept as consolidated E & P.

Question 9

0 out of 1 points

Which of the following potentially is a disadvantage of electing to file a Federal corporate income tax

consolidated return? Answer

Selected Answer:

Deferral of gains realized in transactions between group members

Response

Feedback: All of the items may be computed on a group basis and be used to manage the tax liabilities

of the group as a whole.

Question 10

1 out of 1 points

ParentCo purchased all of SubCo's stock on January 1, 2010, and the companies have filed consolidated

returns since then. Taxable income computations for the members include the following. Neither group

member incurred any capital gain or loss transactions during these years, nor did they make any charitable

contributions.

2009 ParentCo's Taxable Income $100,000 and SubCo's Taxable Income $70,000 and Consolidated Taxable

Income N/A.

2010 ParentCo's Taxable Income $100,000 and SubCo's Taxable Income ($70,000) and Consolidated

Taxable Income $30,000.

2011 ParentCo's Taxable Income $9,000 and SubCo's Taxable Income ($20,000) and Consolidated Taxable

Income ?

2012 ParentCo's Taxable Income $100,000 and SubCo's Taxable Income $230,000 and Consolidated

Taxable Income ?

The 2011 net operating loss: Answer

Selected Answer:

either a or b, but not both

Response

Feedback: The $11,000 (not $20,000) 2011 net operating loss may be carried back against SubCo's 2009

taxable income, as SubCo is solely responsible for generating the loss. Alternatively, ParentCo

could elect to forgo the carryback of the 2011 consolidated loss, thus preserving the loss

deduction for the group's subsequent years.

Question 1

1 out of 1 points


Selected Answer:

Parent's charitable contributions


Question 2

0 out of 1 points

ParentCo, SubOne and SubTwo have filed consolidated returns since 2009. All of the entities were

incorporated in 2008. Taxable income computations for the members include the following. None of the

group members incurred any capital gain or loss transactions during these years, nor did they make any

charitable contributions. 2008 ParentCo's Taxable Income $200,000 and SubOne's Taxable Income $50,000 and SubTwo's Taxable Income $150,000 and

Consolidated Taxable Income N/A.

2009 ParentCo's Taxable Income $200,000 and SubOne's Taxable Income ($60,000) and SubTwo's Taxable Income $70,000 and

Consolidated Taxable Income $210,000.

2010 ParentCo's Taxable Income $60,000 and SubOne's Taxable Income ($80,000) and SubTwo's Taxable Income ($40,000) and

Consolidated Taxable Income ?.

2011 ParentCo's Taxable Income $200,000 and SubOne's Taxable Income $130,000 and SubTwo's Taxable Income $10,000 and


How should the 2010 consolidated net operating loss be apportioned among the group members? Answer

Selected Answer:

$20,000 ParentCo, $20,000 SubOne, $20,000 SubTwo

Response

Feedback: SubOne's Apportioned NOL=$40,000=$60,000 x [$80,000 ÷ ($80,000 + $40,000)]SubTwo's

Apportioned NOL=$20,000=$60,000 x [$40,000 ÷ ($80,000 + $40,000)]

Question 3

0 out of 1 points

The Rub, Sal, and Ton Corporations file Federal income tax returns on a consolidated basis. The group's tax

return currently is under audit. Under a valid tax-sharing agreement, each corporation is liable for one-third

of the group's consolidated tax liability. The affiliates have agreed with the auditor that the group's unpaid

liability for the year is $90,000. Because of an incorrect tax return position, another $3,000 in interest and an

$1,800 penalty is attributable solely to Ton. At present, only Rub is solvent and has the cash with which to

make such a tax payment. What is the maximum amount for which the government could be successful in

forcing Rub to satisfy the outstanding liabilities of the consolidated group? Answer

Selected Answer:

$91,800

Response

Feedback: Each member has joint and several liability for the entire amount of the group's income

taxes, interest, and penalties outstanding.

Question 4

1 out of 1 points



Selected Answer:


Response



Question 5

0 out of 1 points

Which of the following potentially is a disadvantage of electing to file a Federal consolidated corporate

income tax return? Answer

Selected

Answer:

The capital loss of one member is not offset against the capital gain of another member of the

group.

Response Feedback: Deferred transactions can be deferred which is not usually a good thing.

Question 6

1 out of 1 points

Which of the following is eligible to file Federal income tax returns on a consolidated basis? Answer

Selected Answer:

U.S. corporation engaged in the oil and gas industry

Response

Feedback: The U.S. corporation is the only entity that would be eligible to file this on a consolidated

basis.

Question 7

0 out of 1 points



Selected Answer:

Dividends received deduction for payments from a subsidiary to the group's parent

Response



Question 8

0 out of 1 points



Selected

Answer:

According to a tax-sharing agreement that must be approved by the IRS by the end of the first

quarter of the tax year


Question 9

1 out of 1 points


Selected Answer:

Each member keeps its own E & P account.


Question 10

0 out of 1 points

Which of the following items is not computed on a consolidated basis? Answer

Selected Answer:

Net operating losses

Response

Feedback: Each group member may continue to apply the depreciation method best suited for its

needs.

Question 1

0 out of 1 points




contributions.


Income N/A.




Income ?


Taxable Income ?


Selected Answer:

may be carried back to offset SubCo's 2009 taxable income

Response





Question 2

1 out of 1 points


Selected Answer:



Question 3

0 out of 1 points



Selected Answer:

Deferral of gains realized in transactions between group members

Response



Question 4

1 out of 1 points



Selected Answer:

According to an internal tax-sharing agreement


Question 5

1 out of 1 points



Selected Answer:


Response



Question 6

1 out of 1 points






Selected Answer:

$130,000

Response





Question 7

1 out of 1 points




Selected Answer:

$0. Minor did not report an NOL of its own.


Question 8

1 out of 1 points

ParentCo purchased all of the stock of SubCo on January 2, 2009, and the two companies filed consolidated

returns for 2009 and thereafter. Both entities were incorporated in 2008. Taxable income computations for

the members include the following. Neither group member incurred any capital gain or loss transactions

during these years, nor did they make any charitable contributions. No § 382 limit applies. 2008 ParentCo's Taxable Income $100,000 and SubCo's Taxable Income ($75,000) and Consolidated Taxable Income N/A.

2009 ParentCo's Taxable Income $100,000 and SubCo's Taxable Income ($40,000) and Consolidated Taxable Income $60,000.



To what extent can SubCo's 2008 losses be used by the group in 2011? Answer

Selected Answer:

$75,000

Response

Feedback: The $40,000 2009 loss is absorbed in the current year against ParentCo's income. Because the

2008 loss arose in a separate return year, its use as a deduction against group income is limited

to the lesser of SubCo's current-year or cumulative positive contribution to consolidated taxable

income. For 2009 and 2010, this amount is less than zero.

After 2011, SubCo's cumulative contribution to consolidated taxable income was $105,000 =

$40,000 loss for 2009 + 2010's $20,000 income + 2011's income of $125,000. Thus, all of the

2008 separate return year $75,000 loss is applied against 2011 income.

Question 9

0 out of 1 points













Selected Answer:

$20,000 ParentCo, $20,000 SubOne, $20,000 SubTwo

Response

Feedback: SubOne's Apportioned NOL=$40,000=$60,000 x [$80,000 ÷ ($80,000 + $40,000)]SubTwo's

Apportioned NOL=$20,000=$60,000 x [$40,000 ÷ ($80,000 + $40,000)]

Question 10

1 out of 1 points


Selected Answer:


Response


basis.

Question 1

1 out of 1 points



Selected Answer:



Question 2

0 out of 1 points




contributions.


Income N/A.




Income ?


Taxable Income ?


Selected Answer:

may be carried forward only and applied against group income if so elected by ParentCo

Response





Question 3

1 out of 1 points


Selected Answer:



Question 4

1 out of 1 points


Selected Answer:


Response


basis.

Question 5

1 out of 1 points






Selected Answer:

$130,000

Response





Question 6

0 out of 1 points



Selected Answer:

Dividends received deduction for payments from a subsidiary to the group's parent

Response



Question 7

0 out of 1 points

The Rub, Sal, and Ton Corporations file Federal income tax returns on a consolidated basis. The group's tax

return currently is under audit. Under a valid tax-sharing agreement, each corporation is liable for one-third

of the group's consolidated tax liability. The affiliates have agreed with the auditor that the group's unpaid

liability for the year is $90,000. Because of an incorrect tax return position, another $3,000 in interest and an

$1,800 penalty is attributable solely to Ton. At present, only Rub is solvent and has the cash with which to

make such a tax payment. What is the maximum amount for which the government could be successful in

forcing Rub to satisfy the outstanding liabilities of the consolidated group? Answer

Selected Answer:

$4,800

Response

Feedback: Each member has joint and several liability for the entire amount of the group's income

taxes, interest, and penalties outstanding.

Question 8

1 out of 1 points



Selected Answer:


Response



Question 9

1 out of 1 points


Selected Answer:

Parent's charitable contributions


Question 10

1 out of 1 points













Selected Answer:

$0 ParentCo, $40,000 SubOne, $20,000 SubTwo

Response SubOne's Apportioned NOL=$40,000=$60,000 x [$80,000 ÷ ($80,000 + $40,000)]SubTwo's

Feedback: Apportioned NOL=$20,000=$60,000 x [$40,000 ÷ ($80,000 + $40,000)]

Question 1

1 out of 1 points



Selected Answer:



Question 2

1 out of 1 points

ParentCo purchased all of the stock of SubCo on January 1, 2009, for $500,000. SubCo produced a loss for

2009 of $150,000 and distributed cash of $25,000 to ParentCo. In 2010, SubCo generated a loss of $750,000;

in 2011, it recognized net income of $45,000. What is ParentCo's capital gain or loss if it sells all of its

SubCo stock to a nongroup member on January 1, 2012, for $50,000? Answer

Selected Answer:

$430,000

Response

Feedback: When accumulated deficits in the subsidiary's post-acquisition earnings and profits exceed the

acquisition price, an excess loss account is created to permit the group to recognize current

subsidiary losses while avoiding a negative stock basis. If the subsidiary stock is sold to a

nongroup member, the balance of the excess loss account is recognized as capital gain income

by the seller.

Question 3

1 out of 1 points






Selected Answer:

$130,000

Response





Question 4

1 out of 1 points

Which of the following items is not computed on a consolidated basis? Answer

Selected Answer:

Cost recovery deduction

Response

Feedback: Each group member may continue to apply the depreciation method best suited for its

needs.

Question 5

1 out of 1 points

Which of the following potentially is a disadvantage of electing to file a Federal consolidated corporate

income tax return? Answer

Selected Answer:

Recognition of losses from certain intercompany transactions is deferred.

Response Feedback: Deferred transactions can be deferred which is not usually a good thing.

Question 6

1 out of 1 points




contributions.


Income N/A.




Income ?


Taxable Income ?


Selected Answer:

either a or b, but not both

Response





Question 7

1 out of 1 points




Selected Answer:

$0. Minor did not report an NOL of its own.


Question 8

1 out of 1 points



Selected Answer:


Response



Question 9

1 out of 1 points


Selected Answer:


Response


basis.

Question 10

1 out of 1 points


Selected Answer:



Question 1

0 out of 1 points

Martin has a basis in a partnership interest of $100,000. At the end of the current year, the partnership

distributed to Martin, in a proportionate nonliquidating distribution, cash of $10,000, inventory (basis to the

partnership of $6,000 and fair market value of $12,000), and land (basis to the partnership of $20,000 and

fair market value of $15,000). In addition, Martin's share of partnership debt decreased by $10,000 during

the year. What basis does Martin take in the inventory and land and in the partnership interest following the

distribution? Answer

Selected Answer:

$12,000 basis in inventory; $15,000 basis in land, $53,000 basis in partnership

Response

Feedback: Basis of Martin's interest $100,000 Less: Cash and deemed cash distribution (20,000), Basis

before property distributions $80,000 Less: Inventory distribution (6,000) *Less: Land

distribution (20,000)*Basis after property distributions $54,000 Martin's basis in the inventory

and land equals the partnership's basis in these properties. Whether the property is appreciated

or depreciated does not matter in this case since his basis in these properties is not limited.

Question 2

0 out of 1 points

A partnership will take a carryover basis in an asset it acquires when: Answer

Selected Answer:

The partnership acquires the asset through a § 1031 like-kind exchange.

Response

Feedback: When a partner contributes an asset to a partnership in exchange for a partnership interest under

§ 721(a), the partnership takes a carryover basis for the asset under § 723.

Under § 1031, a partnership takes a substituted basis for the asset received in the exchange so

choice "a" is incorrect. The purchase of an asset from either a partner or an outside party will

result in the asset taking a cost basis to the partnership, therefore choice "b" is also incorrect.

Choice "d" is incorrect because when a partnership leases an asset from a partner under a short-

term lease the asset is not a partnership asset and is not recorded on the partnership books.

Question 3

0 out of 1 points

Partner Tom transferred property (basis of $20,000; fair market value of $50,000) to the TUV Partnership in

exchange for a partnership interest. At a later date when Tom's outside basis for his partnership interest was

$70,000, Tom received a $50,000 cash distribution from the partnership. Which one of the following

statements is not true? Answer

Selected

Answer:

If the IRS treated the transaction as a disguised sale, the partnership's basis in the property

would be $50,000. e. None of these statements are correct.

Response

Feedback: A contribution and distribution are presumed to be a disguised sale if they occur within two

years (choice a. is true). Conversely, if there is entrepreneurial risk related to the future

distribution, the transaction is not generally treated as a disguised sale (choice c. is true). If a

transaction is treated as a disguised sale it is treated as a sale for all calculations: The

partnership takes a cost ($50,000) basis in the property (choice d. is true).

Question 4

0 out of 1 points

Wendy receives a proportionate nonliquidating distribution from the WXY Partnership. The distribution

consists of $75,000 cash and property with an adjusted basis to the partnership of $20,000 and a fair market

value of $25,000. Immediately before the distribution, Wendy's adjusted basis for her partnership interest is

$90,000. Wendy's basis in the noncash property received is: Answer

Selected Answer:

$25,000

Response

Feedback: Wendy's basis in the partnership interest is first reduced to $15,000 by the $75,000 cash

distribution. Because this is a nonliquidating distribution, the basis in the noncash property is

the lesser of $15,000 (remaining basis in the partnership interest) or the partnership's $20,000

basis in the property. The basis in the property, therefore, is $15,000, and Wendy's basis in the

partnership interest is reduced to $0.

Question 5

0 out of 1 points

On a partnership's Form 1065, which of the following statements is always true? Answer

Selected Answer:

The partnership balance sheet is required to be presented on a tax basis.

Response

Feedback: The partnership reconciles the "taxable income equivalent"-Net Income (Loss) from the

Analysis of Income (Loss) to book income (choice a. is not true). The partnership's balance

sheet (on Schedule L) will typically be reported on a book basis (choice b is not true). The

partnership reports income from operations on Form 1065, page 1, and it reports other types of

income and expenses (separately stated items) on Form 1065, Schedule K (choice c. is not true).

Question 6

0 out of 1 points

Which of the following partnership owners is personally liable for the entity's debts to general creditors? Answer

Selected Answer:

A member of a limited liability company

Response

Feedback: General partners are jointly and severally liable for the partnership's debts. Limited partners are

not required to make contributions to the entity beyond their contractual obligation for deferred

capital contributions. Members of an LLC are generally not liable for entity debts. For states in

which limited liability limited partnerships may be formed, neither the general nor the limited

partners are liable for entity debts.

Question 7

1 out of 1 points

William's basis in the WAM Partnership interest was $100,000 just before he received a proportionate

liquidating distribution consisting of investment land (basis of $30,000, fair market value $40,000), and

inventory (basis of $30,000, fair market value $70,000). After the distribution, William's recognized gain or

loss and his basis in the land and inventory are: Answer

Selected Answer:

$0 gain or loss; $70,000 (land); $30,000 (inventory)

Response

Feedback: Under the ordering rules for distributions, cash is distributed first, followed by unrealized

receivables and inventory; other assets are distributed last. For William, the inventory is

distributed first and takes a carryover basis of $30,000. This reduces William's basis to $70,000.

The land is distributed next. Because this is a liquidating distribution, the land absorbs

William's remaining basis in WAM of $70,000. William cannot claim a loss because he has

received property other than cash, inventory, and unrealized receivables.

Question 8

0 out of 1 points

Catherine's basis was $50,000 in the CAR Partnership interest just before she received a proportionate

nonliquidating distribution consisting of land held for investment (basis of $40,000, fair market value of

$60,000) and inventory (basis of $40,000, fair market value of $40,000). After the distribution, Catherine's

bases in the land and inventory are respectively: Answer

Selected Answer:

$40,000 and $10,000

Response


receivables and inventory; other assets are distributed last. For Catherine the inventory is

distributed first and takes a carryover basis of $40,000. This reduces Catherine's basis to

$10,000. The land is distributed next and takes the $10,000 remaining basis.

Question 9

0 out of 1 points

Kevin, Chuck, and Greg contributed assets to form the equal KCG Partnership. Kevin contributed cash of

$50,000 and land with a basis of $80,000 (fair market value of $50,000). Chuck contributed cash of $30,000

and land with a basis of $40,000 (fair market value of $70,000). Greg contributed cash of $60,000 and a

fully depreciated property ($0 basis) valued at $40,000. Which of the following tax treatments is not correct? Answer

Selected Answer:

All of these statements are correct.

Response

Feedback: Chuck's basis in the partnership interest equals the $30,000 cash plus his $40,000 basis in the

property contributed. The other three statements are correct. Kevin's basis equals the cash

contribution plus the $80,000 basis in the land. Greg's basis equals the $60,000 cash

contribution since he had no basis in the property he contributed. The partnership takes a

carryover basis in the three contributed properties.

Question 10

0 out of 1 points

Which of the following is an election or calculation made by the partner rather than the partnership? Answer

Selected Answer:

The taxable year of the partnership

Response

Feedback: The partner determines the amount of the § 199 deduction based on information provided by

the partnership and taking into account the taxpayer's other domestic production activities.

Question 1

1 out of 1 points

Wendy receives a proportionate nonliquidating distribution from the WXY Partnership. The distribution

consists of $75,000 cash and property with an adjusted basis to the partnership of $20,000 and a fair market

value of $25,000. Immediately before the distribution, Wendy's adjusted basis for her partnership interest is

$90,000. Wendy's basis in the noncash property received is: Answer

Selected Answer:

$15,000

Response

Feedback: Wendy's basis in the partnership interest is first reduced to $15,000 by the $75,000 cash

distribution. Because this is a nonliquidating distribution, the basis in the noncash property is

the lesser of $15,000 (remaining basis in the partnership interest) or the partnership's $20,000

basis in the property. The basis in the property, therefore, is $15,000, and Wendy's basis in the

partnership interest is reduced to $0.

Question 2

0 out of 1 points





Selected Answer:

None of the above

Response





Question 3

1 out of 1 points





Selected Answer:

Chuck's basis in his partnership interest is $100,000.

Response






Question 4

0 out of 1 points


Selected Answer:

None of these owners are personally liable for entity debts

Response






Question 5

1 out of 1 points

Marty receives a proportionate nonliquidating distribution when the basis of her partnership interest is

$50,000. The distribution consists of $60,000 cash and noninventory property (adjusted basis to the

partnership of $20,000; fair market value of $23,000). How much gain or loss does Marty recognize and

what is her basis in the distributed property and in her partnership interest following the distribution? Answer

Selected Answer:

$10,000 capital gain; $0 basis in property; $0 basis in partnership interest

Response

Feedback: Because Marty received a cash distribution in excess of her basis in the partnership interest

before the distribution, she must recognize a capital gain in the amount of that excess, or

$10,000 ($60,000 distribution - $50,000 basis before distribution). Her basis in the property she

received is limited to the amount of the basis in the partnership interest following the cash

distribution, or $0. Her basis in the partnership interest following all distributions remains $0.

Question 6

0 out of 1 points

Cardinal, LLC incurred $20,000 of startup expenses, $3,000 of organizational costs, and paid $10,000 in

transfer taxes to change the title (ownership) of a building contributed by one of the LLC's members. Which

of the following statements is correct regarding these three amounts? Answer

Selected Answer:

Cardinal may deduct the full amount of the organizational costs.

Response

Feedback: Cardinal can deduct the first $5,000 of startup expenses and the remaining $15,000 of such

expenses can be amortized over 180 months. Cardinal can deduct the entire $3,000 of

organizational costs because the amount is less than $5,000. Cardinal must capitalize the

$10,000 transfer tax as part of the basis in the building; this basis is treated as a new asset and

depreciated in the same manner in which the underlying building is depreciated.

Question 7

1 out of 1 points





Selected Answer:


Response







Question 8

1 out of 1 points


Selected

Answer:

The amount of the § 199 (domestic production activities) deduction related to partnership

activities

Response The partner determines the amount of the § 199 deduction based on information provided by

Feedback: the partnership and taking into account the taxpayer's other domestic production activities.

Question 9

0 out of 1 points

Barry owns a 25% interest in a continuing partnership. The partnership distributes a $20,000 year-end cash

bonus to all the partners. In a proportionate nonliquidating distribution, the partnership also distributed

property (basis of $2,000; fair market value of $3,000) to Barry. Immediately before the distribution, Barry's

basis in the partnership interest was $30,000. As a result of the distribution, Barry recognizes: Answer

Selected Answer:

Capital loss of $7,000

Response

Feedback: On a nonliquidating distribution, the partner does not recognize a loss. Instead, the basis in the

partnership interest is reduced by the cash received and by the partnership's basis in the property

received. Barry's basis in his partnership interest immediately following the distribution is

$8,000 ($30,000 - $20,000 - $2,000).

Question 10

0 out of 1 points

When property is contributed to a partnership for a capital and profits interest, the holding period of the

contributing partner's interest: Answer

Selected Answer:

Always starts the day the property was contributed

Response

Feedback: Generally, the holding period of a partner's interest includes the holding period of any capital

assets or § 1231 property contributed by the partner. The holding period related to other

property starts on the day the partnership interest is acquired.

Question 1

0 out of 1 points


Selected Answer:

A partner in a limited liability limited partnership

Response






Question 2

1 out of 1 points

When property is contributed to a partnership for a capital and profits interest, the holding period of the

contributing partner's interest: Answer

Selected Answer:

May include the holding period of the contributed property

Response

Feedback: Generally, the holding period of a partner's interest includes the holding period of any capital

assets or § 1231 property contributed by the partner. The holding period related to other

property starts on the day the partnership interest is acquired.

Question 3

1 out of 1 points


Selected

Answer:


activities

Response



Question 4

1 out of 1 points

Cardinal, LLC incurred $20,000 of startup expenses, $3,000 of organizational costs, and paid $10,000 in

transfer taxes to change the title (ownership) of a building contributed by one of the LLC's members. Which

of the following statements is correct regarding these three amounts? Answer

Selected Answer:

All of the above statements are true.

Response

Feedback: Cardinal can deduct the first $5,000 of startup expenses and the remaining $15,000 of such

expenses can be amortized over 180 months. Cardinal can deduct the entire $3,000 of

organizational costs because the amount is less than $5,000. Cardinal must capitalize the

$10,000 transfer tax as part of the basis in the building; this basis is treated as a new asset and

depreciated in the same manner in which the underlying building is depreciated.

Question 5

1 out of 1 points





Selected Answer:

No gain or loss

Response




$8,000 ($30,000 - $20,000 - $2,000).

Question 6

1 out of 1 points





Selected Answer:


Response







Question 7

1 out of 1 points

Partner Tom transferred property (basis of $20,000; fair market value of $50,000) to the TUV Partnership in

exchange for a partnership interest. At a later date when Tom's outside basis for his partnership interest was

$70,000, Tom received a $50,000 cash distribution from the partnership. Which one of the following

statements is not true? Answer

Selected

Answer:

If the transaction is treated as a disguised sale, Tom's basis in the partnership interest will be

$20,000.

Response

Feedback: A contribution and distribution are presumed to be a disguised sale if they occur within two

years (choice a. is true). Conversely, if there is entrepreneurial risk related to the future

distribution, the transaction is not generally treated as a disguised sale (choice c. is true). If a

transaction is treated as a disguised sale it is treated as a sale for all calculations: The

partnership takes a cost ($50,000) basis in the property (choice d. is true).

Question 8

0 out of 1 points

Landon received $30,000 cash and a capital asset (basis of $60,000 and fair market value of $80,000) in a

proportionate liquidating distribution. His basis in his partnership interest was $100,000 prior to the

distribution. How much gain or loss does Landon recognize and what is his basis in the asset received? Answer

Selected Answer:

$10,000 gain; $80,000 basis

Response

Feedback: Because Landon has received property other than cash and unrealized receivables or inventory,

no loss may be recognized on the liquidating distribution. The capital asset will take a

substituted basis of $70,000, which was Landon's remaining basis in his partnership interest

after the cash distribution is considered.

Question 9

1 out of 1 points





Selected Answer:


Response






Question 10

1 out of 1 points





Selected Answer:

$10,000 and $40,000

Response





Question 1

1 out of 1 points


Selected Answer:

A general partner in a general partnership

Response






Question 2

1 out of 1 points





Selected Answer:


Response






Question 3

1 out of 1 points





Selected Answer:

No gain or loss

Response




$8,000 ($30,000 - $20,000 - $2,000).

Question 4

1 out of 1 points





Selected Answer:


Response







Question 5

1 out of 1 points

Marty receives a proportionate nonliquidating distribution when the basis of her partnership interest is

$50,000. The distribution consists of $60,000 cash and noninventory property (adjusted basis to the

partnership of $20,000; fair market value of $23,000). How much gain or loss does Marty recognize and

what is her basis in the distributed property and in her partnership interest following the distribution? Answer

Selected Answer:

$10,000 capital gain; $0 basis in property; $0 basis in partnership interest

Response

Feedback: Because Marty received a cash distribution in excess of her basis in the partnership interest

before the distribution, she must recognize a capital gain in the amount of that excess, or

$10,000 ($60,000 distribution - $50,000 basis before distribution). Her basis in the property she

received is limited to the amount of the basis in the partnership interest following the cash

distribution, or $0. Her basis in the partnership interest following all distributions remains $0.

Question 6

1 out of 1 points

Landon received $30,000 cash and a capital asset (basis of $60,000 and fair market value of $80,000) in a

proportionate liquidating distribution. His basis in his partnership interest was $100,000 prior to the

distribution. How much gain or loss does Landon recognize and what is his basis in the asset received? Answer

Selected Answer:

$0 gain or loss; $70,000 basis

Response

Feedback: Because Landon has received property other than cash and unrealized receivables or inventory,

no loss may be recognized on the liquidating distribution. The capital asset will take a

substituted basis of $70,000, which was Landon's remaining basis in his partnership interest

after the cash distribution is considered.

Question 7

1 out of 1 points





Selected Answer:

$10,000 and $40,000

Response





Question 8

1 out of 1 points


Selected

Answer:


activities

Response



Question 9

1 out of 1 points

A partnership will take a carryover basis in an asset it acquires when: Answer

Selected

Answer:

The partnership acquires the asset from a partner as a contribution to partnership capital

under § 721(a).

Response

Feedback: When a partner contributes an asset to a partnership in exchange for a partnership interest under

§ 721(a), the partnership takes a carryover basis for the asset under § 723.

Under § 1031, a partnership takes a substituted basis for the asset received in the exchange so

choice "a" is incorrect. The purchase of an asset from either a partner or an outside party will

result in the asset taking a cost basis to the partnership, therefore choice "b" is also incorrect.

Choice "d" is incorrect because when a partnership leases an asset from a partner under a short-

term lease the asset is not a partnership asset and is not recorded on the partnership books.

Question 10

1 out of 1 points

Martin has a basis in a partnership interest of $100,000. At the end of the current year, the partnership

distributed to Martin, in a proportionate nonliquidating distribution, cash of $10,000, inventory (basis to the

partnership of $6,000 and fair market value of $12,000), and land (basis to the partnership of $20,000 and

fair market value of $15,000). In addition, Martin's share of partnership debt decreased by $10,000 during

the year. What basis does Martin take in the inventory and land and in the partnership interest following the

distribution? Answer

Selected Answer:

$6,000 basis in inventory; $20,000 basis in land, $54,000 basis in partnership

Response

Feedback: Basis of Martin's interest $100,000 Less: Cash and deemed cash distribution (20,000), Basis

before property distributions $80,000 Less: Inventory distribution (6,000) *Less: Land

distribution (20,000)*Basis after property distributions $54,000 Martin's basis in the inventory

and land equals the partnership's basis in these properties. Whether the property is appreciated

or depreciated does not matter in this case since his basis in these properties is not limited.

Question 1

0 out of 1 points

The maximum number of S shareholders is: Answer

Selected Answer:

Indeterminable

Response Feedback: They are limited to 100 shareholders.

Question 2

1 out of 1 points

Which, if any, of the following can be eligible shareholders of an S corporation? Answer

Selected Answer:

A resident alien

Response Feedback: A resident alien can own stock in an S corporation.

Question 3

0 out of 1 points

On January 2, 2009, David loans his S corporation $10,000, and by the end of 2009 David's stock basis is

zero and the basis in his note has been reduced to $8,000. During 2010, the company's operating income is

$10,000. The company also makes distributions to David of $11,000. Which statement is correct? Answer

Selected Answer:

$11,000 LTCG

Response

Feedback: The $11,000 distribution reduced the $10,000 income, so there is no "net increase" to be

applied to the loan basis. Thus, the $11,000 distribution reduces the new $10,000 stock basis to

zero, with a $1,000 LTCG.

Question 4

0 out of 1 points

During 2010, Shirley Nutt, the sole shareholder of a calendar year S corporation, received a distribution of

$16,000. On December 31, 2009, her stock basis was $4,000. The corporation earned $11,000 ordinary

income during the year. It has no accumulated E & P. Which statement is correct? Answer

Selected Answer:

Nutt's stock basis will be $2,000.

Response

Feedback: $11,000 ordinary income; $15,000 return of capital, $1,000 capital gain. Nutt's stock basis is

increased by the $11,000 ordinary income allocable to her, giving a basis of $15,000 before the

distribution. The first $15,000 of the distribution is a return of capital, reducing the stock basis

to zero. The remaining $1,000 constitutes capital gain (the excess over stock basis).

Question 5

0 out of 1 points

How large must total assets on Schedule L be at the end of the year for an S corporation to be required to file

Schedule M-3? Answer

Selected Answer:

Not required to file

Response Feedback: $10 million will require them to file a different schedule.

Question 6

0 out of 1 points

Samantha owned 1,000 shares in Evita, Inc., an S corporation, that uses the calendar year. On October 11,

2010, Samantha sells all of her Evita stock. Her basis at the beginning of 2010 was $60,000. Her share of the

corporate income for 2010 was $22,000, and she receives a distribution of $37,000 between January 1 and

October 11, 2010. Her basis at the time of the sale is: Answer

Selected Answer:

$60,000

Response Feedback: $60,000 + $22,000 - $37,000 = $45,000.

Question 7

0 out of 1 points

Which statement is incorrect with respect to filing for an S election? Answer

Selected Answer:

An extension of time is available for filing Form 2553.

Response Feedback: All items are correct.

Question 8

0 out of 1 points

What statement is correct with respect to an S corporation? Answer

Selected Answer:

An S corporation can own 85% of an insurance company.

Response Feedback: Shareholders can include estates.

Question 9

0 out of 1 points

Which equity arrangement would stop a corporation from being an S corporation? Answer

Selected Answer:

Stock appreciation rights

Response Feedback: An S corporation can't have an insurance company structure.

Question 10

1 out of 1 points

Which type of distribution from an S corporation is taxed at the 0/15% rate? Answer

Selected Answer:

AEP

Response Feedback: AEP is taxed at this rate level.

Question 1

1 out of 1 points


Selected Answer:

A resident alien


Question 2

1 out of 1 points





Selected Answer:

$45,000


Question 3

1 out of 1 points

How large must total assets on Schedule L be at the end of the year for an S corporation to be required to file

Schedule M-3? Answer

Selected Answer:

$10 million

Response Feedback: $10 million will require them to file a different schedule.

Question 4

1 out of 1 points


Selected Answer:

AEP


Question 5

1 out of 1 points


Selected Answer:

An insurance company structure


Question 6

1 out of 1 points

On January 1, 2010, Kinney, Inc. , an electing S corporation, has $4,000 of AEP and a balance of $10,000 in

AAA. Kinney has two shareholders, Erin and Maine, each of whom owns 500 shares of Kinney's stock.

Kinney's 2010 taxable income is $5,000. Kinney distributes $6,000 to each shareholder on February 1, 2010,

and distributes another $3,000 to each shareholder on September 1. How is Erin taxed on this distribution? Answer

Selected Answer:

$1,500 dividend income

Response

Feedback: AAA is $15,000 ($10,000 + $5,000) as of December 31, 2010, before taking into account the

two distributions. Thus, the sum of the distributions ($18,000) exceeds Kinney's AAA by

$3,000. A portion of the $15,000 AAA balance is allocated to each of the February 1 and

September 1 distributions, based upon the respective sizes of the distributions, as follows.

February 1: $12,000/$18,000 x $15,000 = $10,000 September 1: $6,000/$18,000 x $15,000 =

$5,000 Thus, Erin and Maine must both report dividend income of $1,000 for the February 1

distribution and $500 each for the September 1 distribution. Assuming that the shareholders

have sufficient basis in their stock, both Erin and Maine each have a $7,500 return of capital

from AAA.

Question 7

0 out of 1 points

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2? Answer

Selected Answer:

Unreasonable compensation

Response Feedback: None of these are adjustments on the M-2 to the other adjustments account.

Question 8

1 out of 1 points




Selected Answer:

$1,000 LTCG

Response




Question 9

1 out of 1 points

The maximum number of S shareholders is: Answer

Selected Answer:

100

Response Feedback: They are limited to 100 shareholders.

Question 10

0 out of 1 points

An S corporation may be subject to the following tax. Answer

Selected Answer:

None of the above is paid by S corporations.

Response Feedback: S Corporations can be charged a built-in gains tax.

Question 1

1 out of 1 points


Selected Answer:

A resident alien


Question 2

1 out of 1 points




Selected Answer:

$1,000 LTCG

Response




Question 3

1 out of 1 points

An S corporation may be subject to the following tax. Answer

Selected Answer:

Built-in gains tax

Response Feedback: S Corporations can be charged a built-in gains tax.

Question 4

1 out of 1 points

What statement is correct with respect to an S corporation? Answer

Selected Answer:

An estate may be a shareholder.

Response Feedback: Shareholders can include estates.

Question 5

1 out of 1 points

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2? Answer

Selected Answer:

None of the above

Response Feedback: None of these are adjustments on the M-2 to the other adjustments account.

Question 6

1 out of 1 points





Selected Answer:

$45,000


Question 7

1 out of 1 points


Selected Answer:

An insurance company structure


Question 8

1 out of 1 points

Which statement is incorrect? Answer

Selected Answer:

None of the above

Response Feedback: All of these statements are correct.

Question 9

1 out of 1 points


Selected Answer:

AEP


Question 10

1 out of 1 points

During 2010, Shirley Nutt, the sole shareholder of a calendar year S corporation, received a distribution of

$16,000. On December 31, 2009, her stock basis was $4,000. The corporation earned $11,000 ordinary

income during the year. It has no accumulated E & P. Which statement is correct? Answer

Selected Answer:

Nutt recognizes a $1,000 LTCG.

Response

Feedback: $11,000 ordinary income; $15,000 return of capital, $1,000 capital gain. Nutt's stock basis is

increased by the $11,000 ordinary income allocable to her, giving a basis of $15,000 before the

distribution. The first $15,000 of the distribution is a return of capital, reducing the stock basis

to zero. The remaining $1,000 constitutes capital gain (the excess over stock basis).

Question 1

0 out of 1 points

The tax rules regarding the income taxation of trusts and estates are included in which Subchapter of the

Internal Revenue Code? Answer

Selected Answer:

K

Response Feedback: Subchapter J covers income taxation of trusts and estates.

Question 2

0 out of 1 points

Which corporation is eligible to make the S election? Answer

Selected Answer:

Foreign corporation

Response Feedback: This is the only corporation on the list that is allowed to make the S election.

Question 3

0 out of 1 points

Which of the following is not generally a disadvantage of filing Federal corporate income tax returns on a

consolidated basis? Answer

Selected Answer:

The election generally is binding for future tax years.

Response Feedback: This is an advantage of consolidation.

Question 4

1 out of 1 points

Which of the following taxpayers use a Schedule K and K-1 to pass through income, loss, and credit

amounts to the owners or beneficiaries? Answer

Selected Answer:

All of the above taxpayers use Schedule K and K-1

Response Feedback: All of these taxpayers are considered pass through entities.

Question 5

0 out of 1 points

The Jain Estate is required to pay its entire annual accounting income to Sam and Janet. The estate's personal

exemption is: Answer

Selected Answer:

$300

Response Feedback: Estates have a personal exemption of $600.

Question 6

0 out of 1 points

Which statement is incorrect about an S corporation? Answer

Selected Answer:

An S corporation can be a partner in a partnership.

Response Feedback: A partnership can't own S corporation stock.

Question 7

1 out of 1 points

Which of the following is not a requirement that must be met before a group files a consolidated return? Answer

Selected Answer:

All of the corporations must be members of an affiliated group.

Response Feedback: This does not need to be in place for a group to file a consolidated return.

Question 8

0 out of 1 points


Selected Answer:

S corporations resemble partnerships under the Federal income tax law.

Response Feedback: S corporations don't have alternative minimum tax since they don't pay tax.

Question 9

0 out of 1 points

At the beginning of the year, Elsie's basis in the E&G Partnership interest is $60,000. She receives a

proportionate nonliquidating distribution from the partnership consisting of $10,000 of cash, unrealized

accounts receivable (basis of $0, fair market value $30,000), and inventory (basis of $10,000, fair market

value of $20,000). After the distribution, Elsie's bases in the accounts receivable, inventory, and partnership

interest are: Answer

Selected Answer:

$30,000; $20,000; and $0

Response

Feedback: Elsie's $60,000 basis is first reduced by the cash distribution of $10,000 to $50,000. The

accounts receivable and inventory are distributed next and take carryover bases of $0 and

$10,000, respectively. This reduces the basis in the partnership interest to $40,000.

Question 10

1 out of 1 points

Which of the following is a typical duty of a trustee? Answer

Selected Answer:

Determine the date on which trust terminates

Response Feedback: Trustees need to determine the date on which the trust terminates.

Question 11

0 out of 1 points

The distributable net income (DNI) of a fiduciary taxpayer: Answer

Selected Answer:

Specifies the character of the distributions in the hands of the year's income beneficiaries

Response Feedback: All of these items are true of DNI.

Question 12

1 out of 1 points

During the current year, the Madison Trust received $40,000 of taxable interest income, paid trustee's

commissions of $4,000, and had no other income or expenses. The trust instrument requires that $20,000 be

paid annually to Marilyn, and $40,000 be paid annually to Domingo. How much gross income must Marilyn

and Domingo recognize? Answer

Selected Answer:

$12,000 by Marilyn and $24,000 by Domingo

Response

Feedback: On the first tier, distributable net income of $36,000 is attributable to the two income

beneficiaries, pro rata to the amounts required to be distributed to each. Thus, Marilyn

recognizes $12,000 (2/6 x $36,000), and Domingo recognizes $24,000 (4/6 x $36,000).

Question 13

0 out of 1 points

The Roz Trust has distributable net income for the year of $100,000 and no income from tax-exempt

sources. Under the terms of the trust instrument, the trustee must distribute $30,000 to Roger and $30,000 to

Sally. After paying these amounts, the trustee is empowered to make additional distributions at its discretion.

Exercising this authority, the trustee distributes an additional $10,000 to Roger and $30,000 to Sally. How

much gross income from the trust must Sally recognize? Answer

Selected Answer:

$80,000

Response

Feedback: Sally is taxed on $30,000 for the first-tier distribution and $30,000 on the second-tier, computed

as follows. First tier distributions Roger $30,000 + Sally $30,000 = $60,000 total. Total

distributable net income is ($100,000). DNI available for second-tier distribution is $40,000

(difference between $100,000 and $60,000). Second-tier distributions Roger $10,000 + Sally

$30,000 = $40,000. Second-tier amount taxable to Roger is 10/40 x $40,000 = $10,000. Second-

tier amount taxable to Sally is 30/40 x $40,000 = $30,000.

Question 14

1 out of 1 points

Which of the following is a correct definition of a concept related to partnership taxation? Answer

Selected

Answer:

The entity concept treats partners and partnerships as separate units and gives the partnership

its own tax "personality."

Response

Feedback: he entity concept treats the partnership as a distinct unit; this is the theory under which the

partnership is required to file an information return. Choice a. is the definition of a profit

sharing ratio. Choice d. is the definition of a separately stated item. For choice b., the

partnership's inside basis equals the partnership's basis in its assets, as contrasted with the

partners' outside basis (not capital account) in the partnership interest.

Question 15

0 out of 1 points

The trustee of the Epsilon Trust distributed an asset to Telly, a qualifying income beneficiary. The asset's

basis to the trust was $10,000, and its fair market value on the distribution date was $25,000. Which of the

following statements is true? Answer

Selected

Answer: Assuming that the trustee made an election under § 643(e), the trust is allowed a $10,000

distribution deduction for this transaction.

Response Feedback: The beneficiary will take on the basis of the asset to the trust.

Question 16

1 out of 1 points

The Jain Trust is required to pay its entire annual accounting income to the Daytona Museum, a qualifying

charity. The trust's personal exemption is: Answer

Selected Answer:

$300

Response Feedback: Only a complex trust can make a charitable contribution.

Question 17

0 out of 1 points

The Code defines a "simple trust" as which of the following? Answer

Selected Answer:

One whose grantor was not a corporation

Response Feedback: A trust that distributes the income each year is called a simple trust.

Question 18

0 out of 1 points

This year, the Nano Trust reported $50,000 entity accounting income and $40,000 distributable net income

(DNI). Nano distributed $30,000 cash to Horatio, its sole income beneficiary. Nano is a complex trust.

Nano's distribution deduction is: Answer

Selected Answer:

$0. Because the distributions of a complex trust are discretionary, no deduction is allowed.

Response Feedback: The distribution deduction is the lesser of DNI or the amounts actually paid.

Question 19

0 out of 1 points

Which one of the following statements regarding partnership taxation is always correct? Answer

Selected Answer:

A partnership is a taxable entity for Federal income tax purposes.

Response

Feedback: The partnership reports income from operations on Form 1065, page 1, and it reports other

types of income and expenses (separately stated items) on Form 1065, Schedule K (choice b. is

correct). A partnership is not taxed (choice a.). A partnership must file a tax return (choice c.).

A partner's capital-sharing ratio may differ from that partner's profit- or loss-sharing ratio

(choice d.).

Question 20

1 out of 1 points






Selected Answer:

$50,000

Response

Feedback: DNI is distributed in full with the first-tier distributions for the tax year. Thus, Sally is taxed

on her 80/160 share of the DNI, or $50,000.

Question 1

1 out of 1 points


Selected Answer:

100% owned corporation


Question 2

1 out of 1 points



Selected Answer:

$600


Question 3

0 out of 1 points

Delphi is a complex trust. This year it distributed all of its accounting income and $1,000 from corpus.

Delphi's taxable income for the year is: Answer

Selected Answer:

($1,000)

Response

Feedback: After computing distributable net income and the distribution deduction, a fiduciary entity that

distributes all of its accounting income generally "wastes" its personal exemption.

Question 4

1 out of 1 points



Selected

Answer:

Gains from one affiliate can be offset by losses from another. This reduces the tax liabilities



Question 5

1 out of 1 points



Selected Answer:



Question 6

0 out of 1 points


Selected

Answer:

An S corporation may not allocate income and deduction items to specific shareholders, like a

partnership does.


Question 7

1 out of 1 points



Selected Answer:

$300


Question 8

1 out of 1 points




Selected Answer:

$30,000


Question 9

1 out of 1 points


Selected Answer:



Question 10

1 out of 1 points






Selected Answer:

$50,000

Response



Question 11

1 out of 1 points



Selected Answer:

J


Question 12

1 out of 1 points




Selected Answer:

Lacking any election by the trustee, Telly's basis in the asset is $10,000.


Question 13

1 out of 1 points


Selected Answer:



Question 14

1 out of 1 points






Selected Answer:

$0; $10,000; and $40,000

Response




Question 15

0 out of 1 points

The Watson Trust incurred the following items during the year.

Taxable interest received $60,000, Tax-exempt interest received $40,000, Tax preparation fees paid

$10,000.

What is Watson's deduction for the tax preparation fees? Answer

Selected Answer:

$10,000

Response

Feedback: No deduction is allowed for the proportionate amount deemed paid from the exempt

income.

Question 16

1 out of 1 points


Selected Answer:

All of the above


Question 17

1 out of 1 points





Selected Answer:


Response




Question 18

1 out of 1 points


Selected Answer:

One which must distribute its accounting income every year


Question 19

0 out of 1 points


Selected Answer:

The partnership's inside basis is defined as the sum of each partner's capital account balance.

Response

Feedback: The entity concept treats the partnership as a distinct unit; this is the theory under which the





Question 20

0 out of 1 points

Members of a controlled group share all but which of the following tax attributes? Answer

Selected Answer:

The $40,000 AMT exemption.

Response Feedback: The 179 deduction is not a common tax attribute shared.

Question 1

1 out of 1 points

Sam receives a proportionate nonliquidating distribution when the basis of his partnership interest is

$40,000. He received a cash distribution of $25,000 and a property distribution (basis of $10,000 and fair

market value of $12,000). In addition, Sam's share of partnership liabilities was reduced by $20,000 during

the year. How much gain or loss does Sam recognize; what is his basis in the property he received; and what

is his remaining basis in the partnership interest? Answer

Selected Answer:

$5,000 gain; $0 basis in property; $0 remaining basis

Response

Feedback: Sam's basis is first reduced by the $25,000 cash distribution and the $20,000 relief of liabilities

(treated as a cash distribution). As the $45,000 distribution exceeds Sam's basis by $5,000, a

$5,000 gain results and Sam's basis is reduced to $0. The property distributed takes the lesser of

a carryover basis ($10,000) or Sam's remaining basis in the partnership interest ($0); therefore,

Sam has no basis in the property he received and no remaining basis in the partnership interest.

Question 2

1 out of 1 points


Selected Answer:

The § 179 depreciation amount allowed.


Question 3

1 out of 1 points






Selected Answer:

$0; $10,000; and $40,000

Response




Question 4

0 out of 1 points



$10,000.


Selected Answer:

$0

Response


income.

Question 5

1 out of 1 points



Selected Answer:

$300


Question 6

1 out of 1 points


Selected

Answer:

Partnership income is comprised of ordinary partnership income or loss and separately stated

items.

Response





(choice d.).

Question 7

1 out of 1 points



Selected Answer:

$600


Question 8

1 out of 1 points



Selected Answer:

J


Question 9

1 out of 1 points




Selected Answer:



Question 10

1 out of 1 points


Selected Answer:



Question 11

0 out of 1 points

Beneficiary Terry received $40,000 from the Urgent Trust. Trust accounting income for the year was

$50,000. The trust generated $30,000 in cost recovery deductions. How much can Terry deduct with respect

to the cost recovery deductions that Urgent generated? Answer

Selected Answer:

$30,000

Response

Feedback: $30,000 (cost recovery deductions) X [$40,000 (accounting income received by Terry) ÷

$50,000 (entity accounting income)].

Question 12

1 out of 1 points


Selected Answer:

A partnership can own S corporation stock.


Question 13

1 out of 1 points


Selected Answer:

The alternative minimum tax applies to some S corporations.


Question 14

1 out of 1 points

The Code defines a "simple trust" as which of the following?

Answer

Selected Answer:



Question 15

1 out of 1 points


Selected

Answer:



Response






Question 16

1 out of 1 points






Selected Answer:

$50,000

Response



Question 17

1 out of 1 points





Selected Answer:


Response




Question 18

1 out of 1 points


Selected Answer:



Question 19

1 out of 1 points






Selected Answer:

$60,000

Response







Question 20

0 out of 1 points



Selected Answer:

$0.

Response



Question 1

1 out of 1 points


Selected

Answer:



Response






Question 2

1 out of 1 points


Selected Answer:



Question 3

1 out of 1 points


Selected Answer:



Question 4

1 out of 1 points


Selected Answer:



Question 5

1 out of 1 points


Selected Answer:



Question 6

1 out of 1 points


Selected Answer:

All of the above


Question 7

0 out of 1 points



Selected Answer:

($300)

Response



Question 8

1 out of 1 points



Selected Answer:

J


Question 9

1 out of 1 points




Selected Answer:

$24,000

Response



Question 10

1 out of 1 points






Selected Answer:


Response






Question 11

1 out of 1 points






Selected Answer:

$0; $10,000; and $40,000

Response




Question 12

1 out of 1 points



Selected Answer:



Question 13

1 out of 1 points






Selected Answer:

$60,000

Response







Question 14

1 out of 1 points


Selected Answer:



Question 15

1 out of 1 points


Selected Answer:



Question 16

1 out of 1 points





Selected Answer:


Response




Question 17

1 out of 1 points



Selected Answer:

$300


Question 18

1 out of 1 points






Selected Answer:

$50,000

Response



Question 19

1 out of 1 points




Selected Answer:



Question 20

1 out of 1 points



Selected Answer:

$600


Question 1

1 out of 1 points






Selected Answer:

$50,000

Response



Question 2

1 out of 1 points






Selected Answer:


Response






Question 3

1 out of 1 points


Selected Answer:



Question 4

1 out of 1 points



Selected Answer:

J


Question 5

1 out of 1 points






Selected Answer:

$60,000

Response







Question 6

1 out of 1 points


Selected

Answer:



Response






Question 7

1 out of 1 points


Selected

Answer:

Partnership income is comprised of ordinary partnership income or loss and separately stated

items.

Response





(choice d.).

Question 8

1 out of 1 points




Selected Answer:



Question 9

1 out of 1 points


Selected Answer:



Question 10

1 out of 1 points



Selected Answer:

($100)

Response



Question 11

1 out of 1 points


Selected Answer:

All of the above


Question 12

1 out of 1 points


Selected Answer:



Question 13

1 out of 1 points






Selected Answer:

$0; $10,000; and $40,000

Response




Question 14

1 out of 1 points


Selected Answer:



Question 15

1 out of 1 points


Selected Answer:

The alternative minimum tax applies to some S corporations.


Question 16

1 out of 1 points




Selected Answer:

$24,000

Response



Question 17

1 out of 1 points



Selected Answer:



Question 18

1 out of 1 points




Selected Answer:

$30,000


Question 19

1 out of 1 points



Selected

Answer:

Gains from one affiliate can be offset by losses from another. This reduces the tax liabilities



Question 20

0 out of 1 points



$10,000.


Selected Answer:

$4,000

Response


income.

Act 400

Documents

selected answer

teds corporation

shortterm capital loss

operating income

accrual basis c corporation

net capital losses option

personal service corporation

year option