29 Jun Question (TCOs 1 and 8) Sarah an
Question
(TCOs 1 and 8) Sarah and Emily form Red Corporation with the following investments: Sarah transfers computers worth $200,000 (basis of $80,000), and 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, (Points : 5)
Sarah has no recognized gain; Emily recognizes income/gain of $160,000.
Neither Sarah nor Emily recognizes gain or income.
Red Corporation has a basis of $60,000 in the real estate.
Emily has a basis of $60,000 in the shares of Red Corporation.
None of the above
Question 2. 2. (TCOs 1 and 8) Hunter and Warren form Tan Corporation. Hunter transfers equipment (basis of $210,000 and fair market value of $180,000), and Warren transfers land (basis of $15,000 and fair market value of $150,000) and $30,000 of cash. Each receives 50% of Tan’s stock. As a result of these transfers, (Points : 5)
Hunter has a recognized loss of $30,000; Warren has a recognized gain of $135,000.
Neither Hunter nor Warren has any recognized gain or loss.
Hunter has no recognized loss; Warren has a recognized gain of $30,000.
Tan Corporation has a basis in the land of $45,000.
None of the above
Question 3. 3. (TCOs 1, 8, and 9) Eagle Corporation owns stock in Hawk Corporation and has taxable income of $160,000 for the year before considering the dividends received deduction. Hawk Corporation pays Eagle a dividend of $200,000, which was considered in calculating the $160,000. What amount of dividends received deduction may Eagle claim if it owns 15% of Hawk’s stock? (Points : 5)
$0
$112,000
$140,000
$160,000
None of the above
Question 4. 4. (TCOs 1 and 8) Emerald Corporation, a calendar year C corporation, was formed and began operations on July 1, 2010. The following expenses were incurred during the first tax year (July 1 through December 31, 2010) 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 2010? (Points : 5)
$0
$533
$5,367
$5,500
None of the above
Question 5. 5. (TCOs 1 and 9) 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 carry forward 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
What is Beige Corporation’s current E & P? (Points : 5)
$68,000
$77,000
$103,000
$107,000
None of the above
Question 6. 6. (TCOs 1 and 9) Stacey and Andrew each own one half of the stock in Parakeet Corporation, a calendar year taxpayer. Cash distributions from Parakeet are $350,000 to Stacey on April 1 and $150,000 to Andrew on May 1. If Parakeet’s current E & P is $60,000, how much is allocated to Andrew’s distribution? (Points : 5)
$5,000
$10,000
$18,000
$30,000
None of the above
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