Details of this Paper

ACC 5762 Spring 2014 Assignment- Set1

Description

solution


Question

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.

 

Paper#42366 | Written in 18-Jul-2015

Price : $26
SiteLock