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accounting mcq quiz 70 questions

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Question;1);Chris owns 70 percent of ABC Corporation. ABC Corporation;had acquired land known as Parcel A in 1984 for $68,000 and held Parcel A for;investment purposes. During the current taxable year, ABC Corporation sold;Parcel A to Chris for $65,000 which amount was equal to the fair market value;of Parcel A. Shortly after receiving Parcel A, Chris sold Parcel A to his;friend from college for $73,000. How much gain or loss is realized and;recognized by the respective parties as a result of each of the sales?;A. ABC Corporation;realized a loss of $3,000 and recognized a loss of $3,000 on the distribution;Chris realized a gain of $8,000 and recognized a gain of 8,000 on the sale.;B. ABC Corporation;realized a loss of $3,000 and recognized a loss of 3,000 on the distribution;Chris realized a gain of $5,000 and recognized a gain of $5,000.;C. ABC Corporation;realized a loss of $3,000 and recognized a loss of 0, Chris realized a gain of;$8,000 and recognized a gain of $5,000.;D. ABC Corporation;realized a loss of $3,000 and recognized a loss of 0, Chris realized a gain of;$5,000 and recognized a gain of$5,000.;Question 2;For the current taxable year, HIJ Inc. had gross receipts;from operations of $230,000, operating and other expenses of $310,000, and;$120,000 of dividends that it received from a 45 percent-owned domestic;corporation. For the current taxable year, HIJ Inc. has taxable income or a net;operating loss of what amount?;A. $8,000 taxable;income.;B. $40,000 taxable;income.;C. $56,000 net;operating loss. Verified;D. $80,000 net;operating loss.;Question 3;NOP Inc. had the following income and expenses during the;current taxable year. Its income from operations was $250,000, its expenses;from operations were $120,000, its dividends received (from a 30 percent-owned;corporation)) were $80,000, and it made cash charitable contributions of;$30,000;How much is NOP Inc.?s charitable contribution deduction for;the current taxable year?;A. $14,600.;B. $21,000.;C. $26,000.;D. $30,000.;Question 4;For the current taxable year, RST Inc.?s gross income from;operations was $1,000,000 and its expenses from operations were $1,500,000. RST;Inc. also received a $600,000 dividend from a 10 percent-owned corporation. How;much is RST Inc.?s dividends-received deduction?;A. 0.;B. $70,000.;C. $320,000.;D. $420,000.;Question 5;Books and Toys Corporation, a calendar year corporation, had;a net operating loss of $50,000 for 2011. Books and Toys Corporation made a;proper election to forego the carryback period. For 2012, Books and Toys;Corporation correctly deducted $40,000 of the 2011 loss. Books and Toys;Corporation will lose the remaining $10,000 of the loss if the loss cannot be;deducted by the end of which tax year?;A. 2018.;B. 2021.;C. 2026.;D. 2031.;Question 6;LMN Inc. liquidated. As part of the liquidation, one;shareholder, Larry, who owned 30 percent of the stock of LMN Inc., received as;a distribution in exchange for all of his stock in the corporation, inventory;worth $90,000 that had a basis to the corporation of $70,000. How much gain was;recognized by LMN Inc. as a result of this liquidating distribution and what;was the character of the gain?;A. $0 gain.;B. $20,000 capital;gain.;C. $20,000 ordinary;income.;D. $20,000 Section;1231 gain.;Question 7;Ben and John formed BCD Inc., a corporation, in 2012. Ben;received 80% of the voting common stock, the only class of stock and John;received the remaining 20% of the stock. In 2013, Ben transferred additional;property to BCD Inc. The property had an adjusted basis to Ben of $40,000 and a;fair market value of $50,000 on the date of the transfer. On the same day, and;in exchange for the property he transferred to BCD Inc., Ben received cash of;$15,000 and additional stock worth $35,000. How much gain was recognized by Ben;as a result of this transaction?;0.;$10,000.;C. $15,000.;D. $25,000.;Question 8;Sue transferred a building to her newly formed corporation;RSTU Inc. The building had an adjusted basis to Sue of $75,000 and a fair;market value of $150,000 on the date of the transfer. The building was;encumbered by a mortgage of $100,000, which RSTU Inc. assumed. On the same day;and in exchange for the building she transferred to RSTU Inc., Sue received 100;percent of RSTU Inc.?s only class of stock. The fair market value of the stock;at the date of transfer was $50,000. How much gain was recognized by Sue as a;result of this transaction?;A. 0.;B. $25,000.;C. $50,000.;D. $75,000.;Question 9;Bob created MNO Inc. several years ago and has owned all 10;outstanding shares of MNO Inc. since the creation of MNO Inc. The fair market;value of those shares is now $50,000. Bob?s friend, Lee, owns a building having;a fair market value of $80,000 and an adjusted basis to Lee of $20,000. The;building is encumbered by a $30,000 mortgage. Earlier this month, Bob and Lee;discussed Lee?s becoming involved in the business of MNO Inc., and as a result;of these discussions, Lee transferred the building to MNO Inc. and in exchange;for the building, MNO Inc. transferred to Lee 10 shares of authorized but not;previously issued stock of MNO Inc. After the transaction there were 20 shares;of stock issued and outstanding. How much gain was realized and recognized by Lee;as a result of this transaction?;A. $30,000 of gain;was realized and recognized.;B. $30,000 of gain;was realized,0 of which was recognized.;C. $60,000 of gain;was realized, $10,000 of which was recognized.;D. $60,000 of gain;was realized and recognized.;Question 10;Al owned all of the outstanding stock of ABC Corporation. Al;transferred a building, cash, and IBM stock to ABC Corporation. The adjusted;basis and the fair market value of the assets transferred to ABC Corporation;and the amount remaining on the mortgage on the building transferred, were as;follows. A building was transferred by Al to ABC Corporation that had an;adjusted basis to Al of $20,000, a fair market value of $50,000, and a mortgage;of $40,000, that was assumed by the corporation, cash in the amount of $10,000 was;transferred, and IBM stock with an adjusted basis to Al of $15,000 and a fair;market value of $12,000. In exchange for the assets transferred to ABC;Corporation, Al received additional stock of ABC Corporation. How much gain did;Al recognize as a result of this transaction?;A. 0.;B. $10,000.;C. $20,000.;D. $27,000.;Question 11;Fact Pattern for Questions 11 and 12: Sandra owned a rental;apartment building in her sole name for four years. After her business advisors;suggested that she conduct her rental activity in corporate form, she promptly;transferred the apartment building to ABC Rental Corporation, a newly formed;corporation. Sandra received all of the stock of ABC Rental Corporation in;exchange for the apartment building. At the time of the transfer of the;apartment building to ABC Rental Corporation, Sandra?s adjusted basis in the;building was $50,000, the fair market value of the building was $150,000, the;building was subject to a mortgage of $70,000 which ABC Rental Corporation;assumed, and there was depreciation recapture potential of $12,000. Sandra;received stock of ABC Rental Corporation worth $80,000. As a result of the;transaction, how much gain was recognized by Sandra and what was the character;of the gain?;A. 0 gain.;B. $12,000 gain, all;of which was ordinary income.;C. $20,000 gain, at;least $12,000 of which was ordinary income.;D. $30,000 gain, at;least $12,000 of which was ordinary income.;Question 12;Fact Pattern for Questions 11 and 12: Sandra owned a rental;apartment building in her sole name for four years. After her business advisors;suggested that she conduct her rental activity in corporate form, she promptly;transferred the apartment building to ABC Rental Corporation, a newly formed;corporation. Sandra received all of the stock of ABC Rental Corporation in;exchange for the apartment building. At the time of the transfer of the;apartment building to ABC Rental Corporation, Sandra?s adjusted basis in the;building was $50,000, the fair market value of the building was $150,000, the;building was subject to a mortgage of $70,000 which ABC Rental Corporation;assumed, and there was depreciation recapture potential of $12,000. Sandra;received stock of ABC Rental Corporation worth $80,000. As a result of the;transaction, what is the corporation?s basis in the building?;A. $50,000.;B. $70,000.;C. $150,000.;D. $170,000.;Question 13;Larry formed Sleuth Corporation in order to incorporate the;detective agency business that he had been operating for several years as a;sole proprietorship. Larry transferred to Sleuth Corporation the detective;agency?s accounts receivable with an adjusted basis to Larry of $0 and a fair;market value of $6,000, and the office;condominium that Larry owned outright and from which he had operated the;detective agency that had an adjusted basis to Larry of $30,000, a fair market;value of $62,000, and as to which there;was a mortgage payable of $34,000, which was assumed by the corporation. Also transferred to the corporation were;accounts payable in the amount of $3,000.;In exchange for the assets transferred, Larry received 100;percent of the stock of the corporation. Which of the following statements;regarding the tax consequences of the transaction is accurate?;A. Larry recognized;$4,000 of his realized gain.;B. Larry recognized;$7,000 of his realized gain.;C. The corporation?s;basis in the condominium it received from Larry is $30,000.;D. Larry recognized;$6,000 of ordinary income upon the assignment of receivables.;Question 14;ABC Inc. had current earnings and profits of $50,000 when it;distributed to an individual shareholder land that the corporation held as an;investment. On the date the land was distributed, ABC Inc.?s adjusted basis in;the land was $10,000, the fair market value of the land was $50,000, and the;land was encumbered by a $30,000 mortgage, which liability was assumed by the;shareholder. There were no other;transactions that might affect ABC Inc.?s earnings and profits for the year.;What was the amount of ABC Inc.?s earning and profits at the end of the year?;A. $30,000.;B. $50,000.;C. $60,000.;D. $70,000.;Question 15;EFG Inc. distributed land to an individual shareholder in a;nonliquidating distribution. On the date the land was distributed, EFG Inc.?s;adjusted basis in the land was $20,000, the fair market value of the land was;$75,000, and the land was encumbered by a $35,000 mortgage, which liability was;assumed by the shareholder. The corporation?s earnings and profits were;$300,000 on the last day of the year in which the distribution was made after;taking into effect any impact of the distribution on the corporation?s earnings;and profits. As a result of the distribution, how much is the amount of;dividend income to the shareholder, and what is the shareholder?s basis in the;distributed property?;A. Dividend income;of $20,000 and basis of $20,000.;B. Dividend income;of $40,000 and basis of $20,000.;C. Dividend income;of $40,000 and basis of $40,000.;D. Dividend income;of $40,000 and basis of $75,000.;Question 16;XYZ Corporation distributed land Jim, its sole shareholder;in a liquidating distribution. At the time of the distribution, the land had a;fair market value of $120,000 and XYZ Corporation?s adjusted basis in the land;was $100,000. The land was encumbered by a $140,000 mortgage, which mortgage;was assumed by the shareholder. How much gain did XYZ Corporation recognize as;a result of the distribution?;A. 0.;B. $20,000.;C. $40,000.;D. $100,000.;Question 17;FAS Inc. had one class of stock outstanding. The one class;of stock was owned 50 percent by Fred and 25 percent by each of Fred?s two;sons. In the current taxable year, FAS Inc. redeemed 25 percent of Fred?s 50;percent, and in exchange for the stock, FAS Inc. distributed to Fred a building;that had an adjusted basis to FAS Inc. of $10,000 and a fair market value of;$50,000. Assume that FAS Inc.?s current earnings and profits were $200,000;there were no accumulated earnings and profits, and Fred?s total basis in his;stock before the redemption was $20,000. What is Fred?s basis in his remaining;stock after the redemption, and what is his basis in the building distributed;to him?;A. Stock basis;$10,000, building basis: $10,000.;B. Stock basis: $10,000;building basis: $50,000.;C. Stock basis;$20,000, building basis: $10,000.;D. Stock basis;$20,000, building basis: $50,000.;Question 18;A tract of land was distributed by MNO Inc. to its sole;shareholder, Martha, as a dividend. At the time of the distribution, MNO Inc.?s;adjusted basis in the land was $40,000, the fair market value of the land was;$80,000, and the land was encumbered by a $55,000 mortgage. Which of the;following statements is true?;A. The net adjustment to MNO Inc.?s earnings and profits is;an increase of $15,000, (the excess of;the liability over the adjusted basis in the land).;B. The net adjustment to MNO Inc.?s earnings and profits is;an increase of $40,000, (that is, equal to the amount of gain realized by the;corporation).;C. The corporation?s;realized gain of $40,000 is recognized to the extent of the $15,000, (the;excess of the liability over adjusted basis in the land).;D. The shareholder?s;basis in the land distributed by the corporation to the shareholder is $80,000;(which is the fair market value of the land).;Question 19;XYZ Corporation distributed to its shareholders a total of;$30,000 in cash plus property that had a fair market value of $80,000 and a;basis of $60,000. The corporation?s earnings and profits were $100,000 on the;last day of the year in which the distribution was made after taking into;effect any impact of the distribution on the corporation?s earnings and;profits. How much was the total dividend income received by the shareholders as;a result of the distributions made by XYZ Corporation?;A. $50,000.;B. $90,000.;C. $100,000.;D. $110,000.;Question 20;MJJM Inc. has four equal shareholders who are unrelated.;Each shareholder owns 300 shares of the common stock of MJJM Inc. representing;all of the stock of MJJM Inc. During the taxable year, as part of a single;transaction, MJJM Inc. redeemed stock from three of the shareholders.;Specifically, MJJM Inc. redeemed 150 shares from Michael, 75 shares from;Joseph, and 40 shares from John. The redemption was substantially;disproportionate for;A. Michael and;Joseph.;B. Michael and John.;C. Joseph only.;D. Michael only.;Question 21;Fact Pattern for Questions 21 and 22. EFG, Inc. is a;calendar year corporation. EFG, Inc. had current earnings and profits of;$100,000 and no accumulated earnings and profits when it distributed a total of $160,000, as a nonliquidating;distribution, to its two equal shareholders, Jane and Joe. On the date of the;cash distribution, Jane?s basis in her EFG, Inc. stock was $10,000 and Joe?s;basis in his EFG, Inc. stock was $35,000. How much is includible by Jane in her;gross income for the current taxable year with respect to the distribution to;her?;A. $50,000 dividend income and 0 capital gain.;B. $80,000 dividend income and 0 capital gain.;C. 0 dividend income;and $70,000 capital gain.;D. $50,000 dividend income and $20,000 capital gain.;Question 22;Fact Pattern for Questions 21 and 22. EFG, Inc. is a;calendar year corporation. EFG, Inc. had current earnings and profits of;$100,000 and no accumulated earnings and profits when it distributed a total of;$160,000 to its two equal shareholders, Jane and Joe. On the date of the cash;distribution, Jane?s basis in her EFG, Inc. stock was $10,000 and Joe?s basis;in his EFG, Inc. stock was $35,000. What is Joe?s adjusted basis in his EFG;Inc. stock after the distribution?;A. $0.;B. $5,000.;C. $15,000.;D. $35,000.;Question 23;Mary received a liquidating distribution from ABC;Corporation as part of the redemption of all of the ABC Corporation?s stock and;the complete liquidation of ABC Corporation. Mary?s basis for her ABC;Corporation stock was $10,000. In exchange for her stock, Mary received a;payment of $15,000 and property that had an adjusted basis to ABC Corporation;of $10,000, a fair market value of $25,000, and that was encumbered by a $12,000;mortgage which Mary assumed. How much gain did Mary recognize as a result of;this transaction?;A. $3,000.;B. $18,000.;C. $30,000.;D. $42,000.;E. None of the;above.;Question 24;Ann and Irene form AIB Corporation transferring their;respective business assets to AIB Corporation. Ann exchanges her property with;a basis to Ann of $100,000 and fair market value of $400,000 for 200 shares in;AIB Corporation on March 1, 2009. Irene exchanges her property with a basis of;$140,000 and fair market value of $600,000 for 300 shares in AIB Corporation on;April 11, 2009. Bob transfers his property with a basis of $250,000 and fair;market value of $1,000,000 for 500 shares in AIB Corporation on May 15, 2011.;Bob?s transfer is not part of Ann and Irene?s plan to incorporate their;businesses. What gain, if any, will Bob recognize on the transfer?;A. $0.;B. $250,000.;C. $750,000.;D. $1,000,000.;Question 25;Tom and George form T and G Corporation. Tom transfers;machinery worth $100,000 with a basis to;Tom of $40,000, while George transfers land worth $90,000 with a basis to;George of $20,000 and services rendered in organizing the corporation worth;$10,000. Each is issued 25 shares in T and G Corporation. With respect to the;transfers;A. Tom has no;recognized gain, George recognizes gain/income of $80,000.;B. Neither Tom nor;George recognizes gain or income.;C. T and G;Corporation has a basis of $30,000 in the land.;D. George has a basis;of $30,000 in the shares of T & G Corporation.;Question 26;The stock of Kenny Corp. is owned equally by two brothers.;During 2008, they transferred land (which had a basis of $300,000 and a fair;market value of $320,000) as a contribution to capital to Kenny Corp. During;September, 2013, Kenny Corp. adopted a plan of complete liquidation and;subsequently made a pro rata distribution of land back to the brothers. At the;time of the liquidating distribution, the land had a fair market value of;$180,000. What amount of loss can be recognized by Kenny Corp. on the distribution;of land?;A. $0.;B. $20,000.;C. $120,000.;D. $140,000.;Question 27;Henry, Emmy, and Frannie, unrelated individuals, own all of;the stock in New Corporation with earnings and profits of $1,200,000 as;follows: Henry own 1,300 shares, Emmy owns 400 shares, and Frannie owns 300;shares. New Corporation redeems 300 of Henry?s shares with a basis of $60,000;for $450,000. With respect to the distribution in redemption of the stock;A. Henry has a;capital gain of $390,000.;B. Henry has;dividend income of $450,000.;C. Henry has;dividend income of $390,000.;D. Henry has a;capital gain of $450,000.;Question 28;Lucinda owns 1,100 shares of Old Corporation stock at a time;when Old Corporation has 2,000 shares of stock outstanding. The remaining;shareholders are unrelated to Lucinda. The corporation redeems 400 shares from;Lucinda. Does the transaction qualify as substantially disproportionate;redemption as to Lucinda?;A. We do not have;sufficient information.;B. No.;C. Yes.;D. This is not a;transaction that could qualify for sale or exchange treatment.;Question 29;Helen, Greg, and Wanda own the stock in HGW Corporation with;earnings and profits of $900,000 as follows: Helen, 600 shares, Greg, 400;shares, and Wanda, 1,000 shares. Greg is Helen?s son, and Wanda is Helen?s;sister. HGW Corporation redeems 400 of Helen?s shares with a basis of $55,000;for $240,000. Helen purchased the stock three years ago as an investment. With;respect to the stock redemption, Helen has;A. Dividend income of $185,000.;B. Dividend income of $240,000.;C. Long-term capital gain of $185,000.;D. Long-term capital gain of $240,000.;Question 30;JKL Corporation has earnings and profits of $800,000 and has;1,000 shares of stock outstanding. That stock is held 550 shares by Anna and;450 shares by Ellen, who are unrelated individuals. JKL Corporation redeems 200;of Anna?s shares for $1,000 per share. Anna paid $300 per share for her JKL;Corporation stock nine years ago. Which of the following statements is correct;with respect to the stock redemption?;A. Anna has dividend;income of $200,000.;B. Anna has a;long-term capital gain of $140,000.;C. Anna?s basis in;her remaining 350 shares is $60,000.;D. JKL Corporation;reduces its E & P by $200,000.;Question 31;Evan transferred real estate to a corporation in a Code;Section 351 transaction. The real estate was a capital asset in Evan?s hands;and will also be a capital asset when held by the corporation. Evan?s basis in the real estate was $10,000;and the value of the real estate was $8,000 on the date of the transfer. If;Evan received $2,000 in cash and 100 shares of stock from the corporation in;exchange for the real estate, the resulting bases for Evan?s stock and the;corporations real estate are;A. Evan?s stock basis;is $8,000, Corporation?s basis in the real estate is $8,000;B. Evan?s stock basis;is $10,000, Corporation?s basis in the real estate is $10,000;C. Evan?s stock basis;is $10,000, Corporation?s basis in the real estate is $8,000;D. Evan?s stock basis;is $6,000, Corporation?s basis in the real estate is $12,000;Question 32;MNOP, Inc. redeemed 100 shares of Julia?s shares. The;redemption did not satisfy all the requirements and thus was treated as a;dividend for tax purposes. Julia?s basis in the 100 shares redeemed;A. Disappears forever.;B. Transfers to her remaining shares in MNOP Inc.;C. Reduces her dividend income by her adjusted basis in the;shares.;D. None of the above.;Question 33;Pursuant to a plan of corporate reorganization which;qualified as an A reorganization, Lou;received one share of stock of X;Corporation worth $65 and cash of $20 in exchange for a share of stock in Y;Corporation with a $95 basis to Lou. What is Lou?s recognized gain or loss on;this exchange?;A. 0.;B. $10 loss.;C. $10 gain.;D. $20 gain.;Question 34;Pursuant to a plan of corporate reorganization, Pat;exchanged 1,000 shares of Stream Corporation stock that she had purchased for;$60,000, for 1,200 shares of Creek Corporation voting stock having a fair;market value of $70,000, and $10,000 in cash. What is Pat?s recognized gain on;the exchange, and what is her basis in the Creek Corporation?s stock?;A. $10,000 gain;$60,000 basis.;B. $10,000 gain;$70,000 basis.;C. $20,000 gain;$60,000 basis.;D. $20,000 gain;$70,000 basis.;Question 35;Which of the following statements is true concerning all;types of tax-free corporate reorganizations?;A. Assets are;transferred from one corporation to another.;B. Stock is;exchanged between the shareholders of at least two corporations.;C. Liabilities that;are assumed when cash is also used as consideration will always be treated as;boot.;D. None of the above;statements is true.;Question 36;Dick, Bev and Mollie form Murphy Corporation. Dick transfers;land worth $80,000 (adjusted basis is $25,000) for 80 shares, Mollie transfers;$40,000 cash for 40 shares and Bev transfers equipment worth $40,000 (adjusted;basis is $16,000) and $40,000 of services for 80 shares. Bev?s tax consequences;are;A. $64,000;recognized gain, basis in 80 shares of $80,000;B. $40,000;recognized gain, basis in 80 shares of $56,000;C. $24,000;recognized gain, basis in 80 shares of $40,000;D. $0;recognized gain, basis in 80 shares of $16,000;Question 37;Best Company, Inc. had gross receipts of $400,000, cost of;goods sold of $110,000, other expenses of $100,000 and a $90,000 net capital;loss. Its taxable income is;A. $210,000.;B. $200,000.;C. $190,000.;D. $100,000.;Question 38;Smith owns 85 percent of Smith Sisters Company, Inc. On March 8, 2013, she contributed land to the;firm. Her adjusted basis in the land was $60,000 and its fair market value on;March 8 was $140,000. Smith did not receive anything in return for the;contribution. As a result of this transaction, Smith Sisters Company, Inc.;will;A. recognize a gain of $80,000 and will take a basis in the;land of $80,000.;B. recognize a gain of $140,000 and will take a basis in the;land of $140,000.;C. not recognize a gain and will take a basis in the land of;$60,000.;D. not recognize a gain and will take a basis in the land of;$140,000.;Question 39;Jessica owns 60 percent of Hudson Company, Inc. The firm;needs some assets and all of the shareholders are considering contributing;assets in a prearranged plan that would qualify all of them for Code Section;351 treatment. There has been no;agreement among the parties as to the assets each would contribute, but it has;been agreed that the fair market value of the assets contributed by each of;them will be $150,000. Jessica is considering contributing 100 shares of XYZ;Company, Inc. stock. Her basis in the shares is $200,000 and their fair market;value is $150,000. Jessica is uncertain about the transaction. She is also;considering selling the shares and contributing;cash. Which of the following statements is correct?;A. If Jessica contributes the shares, then she will be able;to recognize a $50,000 loss.;B. If Jessica sells the shares to Hudson Company, Inc. then;she will be able to recognize $50,000 loss.;C. If Jessica sells the shares on a national stock exchange;and contributes $150,000 of cash to Hudson Company, Inc. she will be able to;recognize a $50,000 loss.;D. None of the above;is correct.;Question 40;A ?C? corporation must do which of the following with;respect to its taxable year?;A. The corporation must select a calendar year.;B. The corporation must select a fiscal year if it has a;business reason for selection.;C. The corporation may select a calendar year or fiscal;regardless of the reason for selection.;D. The corporation must select a year that is the same as;its major shareholders.;Question 41;Paula receives a liquidating distribution from Pell;Corporation as part of a redemption of all of its stock. Paula?s basis for her;Pell stock is $10,000. In exchange for her stock, Paula receives property with;an $8,000 basis and a $15,000 fair market value that is subject to a $2,000;mortgage, and also receives cash of $5,000. How much is Paula?s recognized;gain?;A. $12,000.;B. $10,000.;C. $8,000.;D. $0.;Question 42;Paula receives a liquidating distribution from Pell;Corporation. Paula?s basis for her Pell stock is $10,000. In exchange for her;stock, Paula receives real estate with an $8,000 basis and a $15,000 fair;market value that is subject to a $2,000 mortgage, and also receives cash of;$5,000. What is Paula?s basis in the;real estate she received?;A. $3,000.;B. $8,000.;C. $15,000.;D. $20,000.;Question 43;Ellen sells her Section 306 stock during the year for;$16,000. Her basis in the stock was $2,000. In 2006, when she received the;stock, its fair market value was $12,000 and the corporation?s earnings and;profits were $10,000. Assuming that Ellen retains her common stock, the result;of the sale is;A. $14,000 ordinary (dividend) income.;B. $14,000 long-term capital gain.;C. $10,000 ordinary (dividend) income and $4,000 long- term;capital gain.;D. $12,000 ordinary (dividend) income and $2,000 long-term;capital gain.;Question 44;Babb Corporation owns 80 percent of Atley Corporation?s;stock and Linda owns the remaining 20 percent of Atley?s stock. Babb;Corporation?s basis for its Atley stock is $300,000 and Linda?s Atley stock has;a basis of $80,000. Pursuant to a plan of complete liquidation of Atley;Corporation, Babb Corporation receives property with a $400,000 adjusted basis;and a $480,000 fair market value, and Linda receives property with a $130,000;adjusted basis and a $120,000 fair market value. The bases of the properties to;Babb Corporation and Linda are;A. Babb: $480,000, Linda: $120,000.;B. Babb: $400,000, Linda: $130,000.;C. Babb: $300,000, Linda: $80,000.;D. Babb: $400,000, Linda: $120,000.;Question 45;The following statements regarding a corporation?s;liquidating distribution of loss assets to shareholders are all false, except;A. The liquidating corporation cannot recognize a loss on a;liquidating distribution.;B. A loss can be recognized on a subsidiary liquidating;distribution to which Code Section 332 applies.;C. The liquidating corporation cannot recognize a loss on a;distribution to a shareholder who is a ?related taxpayer.?;D. The general rule is that all losses are realized and;recognized, subject to some exceptions.;Question 46;ABC Corporation made cash contributions of $35,000 to;charitable organizations in 2013. ABC Corporation had taxable income of $280,000 without taking;into account its charitable contributions for the taxable year ended December;31, 2013, but after deducting a dividends-received deduction of $34,000. What amount, if any, can ABC Corporation;deduct as charitable contributions for 2013?;A. $32,000;B. $31,400;C. $35,000;D. 0;Question 47;Jack transferred property with an adjusted basis of $45,000;to JKL Corporation. There was a $35,000 mortgage on the property. In exchange for the transferred property;Jack received stock with a fair market value of $65,000 and $25,000 cash, and;the corporation assumed the liability on the property. How much gain is recognized by Jack?;A. $0;B. $20,000;C. $25,000;D. $35,000;Question 48;Jack transferred to JKL Corporation, real property that had;an adjusted basis to Jack of $45,000. There was a $35,000 mortgage on the;property. In exchange for the;transferred property, Jack received stock with a fair market value of $65,000;and $25,000 cash, and the corporation assumed the liability on the;property. What is Jack?s basis in the;stock he received?;A. $0;B. $20,000;C. $25,000;D. $45,000;Question 49;Jack transferred property with an adjusted basis of $45,000;to JKL Corporation. There was a $35,000 mortgage on the property. In exchange for the transferred property;Jack received all of the stock of the corporation that had a fair market value;of $70,000 and cash of $25,000, and the corporation assumed the liability on;the property. What is JKL Corporations? basis in the property;transferred to it by Jack?;A. $45,000;B. $65,000;C. $70,000;D. $90,000;Question 50;Jack and Jill each own one-half of the stock of JJ;Corporation, which corporation has earnings and profits of $15,000. JJ Corporation distributed to its two;shareholders property with a total fair market value of $24,000 and an adjusted;basis to the corporation of $24,000. The;amount taxable to each shareholder as a dividend is;A. $0;B. $7,500;C. $12,000;D. $15,000;Extra Credit (Maximum of 20 points).;The following 20 questions are extra credit. Each correct answer is worth one point.;You will not lose credit on the regular portion of Test One;for wrong answers on the extra credit portion.;The answer sheet for the extra credit is the second page of;the answer sheet for Test One.;If you choose to do the extra credit question, your answers;are due by 11 p.m. on May 17.;1. Future;Inc. reported the following results for the year;Net income per books $110,000;Federal income taxes 36,170;Life insurance proceeds on key employee 15,000;Tax-exempt interest income 13,000;Net capital loss;25,000;Future?s taxable income for the year was;a. $123,170;b. $143,170;c. $72,000;d. $135,000;e. $107,000;2. Schedule;M-3 is used to reconcile;a. uncertain;tax positions;b. U.S. GAAP;and IFRS differences;c. Schedule;M-1 and Schedule M-2 differences;d. Book income;and taxable income differences;3. Assume;corporate tax rates are a constant 35%. Elco started operations at the;beginning of this year. Its book income is $10 million and its taxable income;is $13 million. The difference will give rise to;a. deferred;tax liability of $1,050,000;b. deferred;tax asset of $1,050,000;c. income;taxes payable of $3,500,000;d. income tax;expense of $4,550,000;4. Which of;the following items are eligible for immediate expensing and 180-month;amortization?;(1.) Fee to CPA;to handle Subchapter S election;(2.);Refreshments served at organizational meetings;(3.);Underwriting commission;(4.) Legal fees;in connection with incorporation;(5.) Recording;fees upon transfer of assets to corporation;a. (2), (4);and (5);b. (1), (2), and (5);c. (1), (2);(3), (4), and (5);d. (1), (2);and (4);5. When;comparing corporate and individual taxation the following statements are true;except;a. Individuals;have exemptions and a standard deduction, corporations do not.;b. Both types;of taxpayers have percentage limitations on the charitable contribution;deduction, coupled with a carryover of the excess contribution.;c. All;taxpayers may carry net operating losses back two years, forward 20.;d. Both;corporate and individual taxpayers may have a long-term capital loss;

 

Paper#41819 | Written in 18-Jul-2015

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