Q1. In the case of a taxpayer who uses the lower-of-cost-or-market inventory method:
a."Market" means the price at which the company expects to sell the goods.
b.Excess inventories can be written-off in the year the company decides the goods are overstocked.
c.Either FIFO or LIFO can be used.
d."Market" means the replacement cost of the goods.
e.None of the above.
Q2.In comparing regular (C) corporations with individuals, which of the following, if any, relate only to (C) corporations?
a.Correct! A net long-term capital gain is taxed as ordinary income.
b.An election can be made to defer recognition of gain on involuntary conversion under § 1033.
c.Excess capital losses can be carried forward.
d.The carryover period for excess capital losses is unlimited.
e.None of the above.
Q3.In comparing regular (C) corporations with individuals, which of the following, if any, relate only to individuals?
a.The AMT applies.
b.Qualified dividend income is subject to the same top tax rate that is applicable to net long-term capital gain.
c.Excess long-term capital losses are carried over as short-term capital losses.
d.The carryover period for excess capital losses is five years.
e.None of the above.
Q4.During the current year, Goose Corporation (a calendar year, cash basis taxpayer) receives cash dividends as follows:
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Source of Dividends
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Ownership Percentage
|
Dividends
|
|
Emu corporation
|
90%
|
$90,000
|
|
Robin Corporation
|
21%
|
60,000
|
|
Crane Corporation
|
10%
|
30,000
|
Presuming the taxable income limitation does not apply, Goose Corporation's dividends received deduction for the current year is
a.$126,000.
b.$135,000.
c.$141,000.
d.$159,000.
e.None of the above.
Q5.Teal Corporation is incorporated in November 2008. The following formation expenses are incurred in 2008:
a.$2,000.
b.$5,000.
c.$6,000.
d.$9,000.
e.None of the above.
|
Legal and accounting expenses incident to organization
|
$4,000
|
|
Expenses of temporary directors and organizational meetings of directors and shareholders
|
2,000
|
|
Expenditures connected with issuing and selling shares of stock
|
3,000
|
Except for the issuing and selling stock expenses which are paid in 2009, all other expenses are paid in 2008. If Teal Corporation uses the cash basis and adopts a calendar year for tax purposes, the amount of organizational expenditures it can elect to expense for 2008 is:
Q6.Two unrelated calendar year C corporations have the following taxable income for the current year:
a.$12,500 for Blue and $18,850 for Green.
b.$24,500 for Blue and $31,500 for Green.
c.$12,500 for Blue and $31,500 for Green.
d.$24,500 for Blue and $18,850 for Green.
e.None of the above.
|
Taxable income
|
Blue Corporation
|
Green Corporation
|
|
$70,000
|
$90,000
|
Blue Corporation is a qualified personal service corporation. Based on these facts, their corporate income tax liability is:
Q7.To improve its liquidity, the shareholders of Spoonbill Corporation make a capital contribution of $200,000 in cash. To facilitate the building of a manufacturing plant, the City of Wichita donates land (worth $800,000) to Spoonbill Corporation. As a result of these transactions, Spoonbill has:
A.No income and a basis in the land of zero.
b.Income of $1 million and a basis in the land of zero.
c.Income of $800,000 and a basis in the land of $800,000.
d.No income and a basis in the land of $800,000.
e.None of the above.
Q8.Maize Corporation is liquidated and its assets are distributed to its 10 equal and unrelated individual shareholders. The assets distributed are as follows:
a.One of the tax consequences of the liquidating distribution is:
b.No gain or loss is recognized by Maize Corporation.
c.Maize Corporation will recognize no loss on the securities, but must recognize a gain of $100,000 on the land.
d.The shareholders will have a basis of $850,000 in the property they receive.
e.The shareholders will have a basis of $800,000 in the property they receive.
f.None of the above.
|
|
Basis to Maize Corporation
|
Value When Distributed
|
|
Marketable securities
|
$300,000
|
$250,000
|
|
Land
|
500,000
|
600,000
|
Q9.Travis and his three sisters are equal partners in the Heron Partnership. In 2006, Travis sells property (basis of $300,000) to Heron for its fair market value of $280,000. In 2008, Heron sells the property to a third party for $290,000. Which of the following statements correctly describes these transactions?
a.Travis has no recognized loss, and Heron has a recognized gain of $10,000.
b.Travis has no recognized loss, and Heron has no recognized gain or loss.
c.Travis has a recognized loss of $20,000, and Heron has no recognized gain or loss.
d.Travis has a recognized loss of $20,000, and Heron has a recognized gain of $10,000.
e.None of the above.