1. Donald owns a 60% interest in a partnership that earned $230,000 in the current year. He also owns 60% of the stock in a C corporation that earned $230,000 during the year. Donald received $50,000 in distributions from each of the two entities during the year. With respect to this information, Donald must report $188,000 of income on his individual income tax return for the year.
a. True
b. False
2. Ivory Corporation, a calendar year, accrual method C corporation, has two cash method, calendar year shareholders who are unrelated to each other. Craig owns 55% of the stock, and Oscar owns the remaining 45%. During 2011, Ivory paid a salary of $200,000 to each shareholder. On December 31, 2011, Ivory accrued a bonus of $50,000 to each shareholder. Assuming that the bonuses are paid to the shareholders on February 1, 2012, compute Ivory Corporation's 2011 deduction for the above amounts.
a. $0.
b. $250,000.
c. $400,000.
d. $450,000.
e. $500,000.
3. Bear Corporation has a net short-term capital gain of $35,000 and a net long-term capital loss of $200,000 during 2011. Bear Corporation has taxable income from other sources of $600,000. Prior years' transactions included the following:
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2007
|
Net short-term capital gain
|
$45,000
|
|
2008
|
Net long-term capital gain
|
20,000
|
|
2009
|
Net short-term capital gain
|
55,000
|
|
2010
|
Net long-term capital gain
|
30,000
|
|
|
|
|
Compute the amount of Bear's capital loss carryover to 2012.
a. $0.
b. $60,000.
c. $105,000.
d. $165,000.
e. $200,000.
4. Grocer Services Corporation (a calendar year taxpayer), a wholesale distributor of food, made the following donations to qualified charitable organizations during the year:
|
|
Adjusted Basis
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Fair Market Value
|
|
Food (held as inventory) donated to the Ohio
Children's Shelter
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$3,500
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$8,000
|
|
|
|
|
|
Passenger van to Ohio Children's Shelter, to be used to
transport children to school
|
7,500
|
7,100
|
|
|
|
|
|
Stock in Acme Corporation acquired 7 months ago and
held as an investment, donated to Southwest University
|
4,000
|
6,200
|
|
|
|
|
How much qualifies for the charitable contribution deduction?
a. $15,000.
b. $16,850.
c. $17,250.
d. $19,450.
e. None of the ab
5. Emerald Corporation, a calendar year C corporation, was formed and began operations on July 1, 2011. The following expenses were incurred during the first tax year (July 1 through December 31, 2011) of operations:
|
Expenses of temporary directors and of organizational meetings
|
$9,000
|
|
Fee paid to the state of incorporation
|
1,000
|
|
Accounting services incident to organization
|
2,500
|
|
Legal services for drafting the corporate charter and bylaws
|
3,500
|
|
Expenses incident to the printing and sale of stock certificates
|
4,000
|
|
|
|
Assuming a § 248 election, what is the Emerald's deduction for organizational expenditures for 2011?
a. $0.
b. $533.
c. $5,367.
d. $5,500.
e. None of the above.
6. During 2011, Sparrow Corporation, a calendar year C corporation, had operating income of $510,000, operating expenses of $370,000, a short-term capital loss of $25,000, and a long-term capital gain of $80,000. How much is Sparrow's tax liability for 2011?
a. $46,100.
b. $59,300.
c. $69,050.
d. $76,050.
e. None of the above.
7. George Judson is the sole shareholder and employee of Black Corporation, a C corporation that is engaged exclusively in engineering services. During the year, Black has gross revenues of $420,000 and operating expenses (excluding salary) of $200,000. Further, Black Corporation pays George a salary of $190,000. The salary is reasonable in amount and George is in the 35% marginal tax bracket irrespective of any income from Black. Assuming that Black Corporation distributes all after-tax income as dividends, how much total combined income tax do Black and George pay in the current year? (Ignore any employment tax considerations.)
a. $66,675.
b. $79,925.
c. $83,325.
d. $87,500.
e. None of the above.