1.Which of the following nominal rates does not apply to a C Corporation?
a. 10%
b. 15%
c. 25%
d. 35%
2. Which of the following is never included in gross income?
a. Loss on stock sale
b. Social security benefits
c. Unemployment benefits
d. Gifts
3.What is George's gross income if he has the following: Salary = $78,000; Dividends = $4,000; interest on city of San Francisco bonds = $2,000; a gain of $14,000 on a stock sale and a $4,000 loss on a small sole proprietorship that he owns.
a.$78,000
b. $84,000
c. $92,000
d. $96,000
4. Coral Corporation (a C corporation) sold $100,000 of merchandise for which it paid $40,000. It also paid $35,000 of other expenses. All transactions were in cash. What is Coral Corporation's after tax net cash inflow?
a. $100,000
b. $60,000
c. $25,000
d. $21,250 25K-(100K-40K-35Kx15%)
5. Crispen Corporation can invest in a project that costs $400,000. The project is expected to have an after tax return of $250,000 in each of years 1 and 2. Crispen normally uses a 10 percent discount rate to evaluate projects but feels it should use 12 percent to compensate for inflation. How much difference does the rate make in the after tax net present value of the project?
a. $50,000
b. $22,500
c. $20,000
d. $11,250
6. A decision in the small case division of the Tax Court can be appealed only to
a. Court of Appeals
b. Supreme Court
c. Regular Tax Court
d. Federal District Court
e. None of the above
7. Sheryl sold 100 shares of ABC stock for $2,100 and 300 shares of XYZ stock for $8,900. She purchased the ABC stock four years ago for $1,200 and the XYZ stock two years ago for $9,100. What is the net effect of these sales on Sheryl's income?
a. $200 net gain
b. $700 net gain(2100-1200)-(8900-9100)
c. $900 net gain
d. $1,100 net gain
8. Abdo Corporation received permission to change its tax year end from December 31 to August 31 in 2013. Its income from January 1 through August 31 is $278,000. What is Abdo's tax liability?
a. $91,670
b. $94,520
c. $108,420
d. $141,780
9. Cora owns 6,000 shares of KLM stock, 2,000 shares of BBT Mutual fund, and 10,000 shares of Centex Corporation. Her 1099DIV forms from these investments showed the following:
KLM: $3 per share distribution all reinvested in KLM
BBT Mutual fund: $5 per share distribution, $1 of which
represents a capital gain distribution; none of this is reinvested. Centex: $2 per share distribution, all of which represents a return of capital. How much must Cora include in her income in the current year?
a. $48,000
b. $28,000
c. $22,000
d. $20,000
10. Wilma is CEO of and owns 100 percent of WT Enterprises, a cash basis, calendar year corporation. The company has always been profitable but over the last five years Wilma's salary has increased from over $400,000 per year to over $1,000,000 and it has failed to pay dividends. Which of the following will not occur if the IRS determines that $500,000 of her salary is unreasonable?
a. Wilma will pay an additional tax on the $500,000 recharacterized as dividend.
b. Wilma will be eligible for a refund of Medicare taxes.
c. WT will lose a $500,000 deduction for the recharacterized
dividend.
d. WT will be eligible for a refund of a portion of FICA taxes paid.