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1) In the present year, Star Corporation (a calendar year, cash basis taxpayer) receives cash dividends as follows:

Source of Dividends     Ownership Percentage     Dividends
Emu corporation     90%     $90,000
Robin Corporation     21%     60,000
Crane Corporation     10%     30,000

Presuming the taxable income limitation doesn’t apply, Star Corporation's dividends received reduction for the present year is

a. $141,000.
b. $135,000.
c. $126,000.
d. $159,000.
e. None of the above.

2) Sun Corporation is incorporated in November 2008. Following formation expenses are incurred in 2008:

a. $9,000.
b. $6,000.
c. $5,000.
d. $2,000.
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 associated with issuing and selling shares of stock     3,000

Except for issuing and selling stock expenses that are paid in 2009, all other expenses are paid in 2008. If Sun Corporation uses cash basis and accepts a calendar year for tax purposes, amount of organizational expenditures it can choose to expense for 2008 is:

3) Two unrelated calendar year C corporations contain the taxable income for the present year are as follows:

a. $12,500 for Blue and $18,850 for Green.
b. $24,500 for Blue and $18,850 for Green.
c. $12,500 for Blue and $31,500 for Green.
d. $24,500 for Blue and $31,500 for Green.
e. None of the above.

Taxable income     Blue Corporation     Green Corporation
                                $70,000                   $90,000

Shine Corporation is qualified personal service corporation. Determine corporate income tax liability is on the basis of these facts.

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  • Reference No.:- M99829

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