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Accounting questions 2014

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Question;Please read the following carefully. For each question;unless the question expressly provides to the contrary, you should assume that;1.;all events occurred in ?the;current taxable year,?;2. all persons are United States;citizens;3. there is no tax avoidance purpose for;any transaction, and that with respect to any mortgage onany property, there was a bona fide;business purpose for incurring or assuming the debt;4.;whenever a party receives;encumbered property, the party assumed the mortgage, even if not specifically;stated;5. there is no special election made;unless the facts specifically state that there is an election made or in effect;6. in all cases, there is only one class;of stock issued and outstanding in any corporation, and that is common voting;stock, unless the question expressly states to the contrary, and;7.;all corporations are ?C?;corporations.;For each question, choose the one letter that;best answers the question or completes the sentence.;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.;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 contributingcash. 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.;inc

 

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