Question;Seven years ago, Eleanor transferred property she had used in her sole proprietorship to Blue Corporation for 2,000 shares of Blue Corporation in a transaction that qualified under ? 351. The assets had a tax basis to her of $400,000 and a fair market value of $700,000 on the date of the transfer. In the current year, Blue Corporation (E & P of $1 million) redeems 600 shares from Eleanor for $260,000 in a transaction that qualifies for sale or exchange treatment. With respect to the redemption, Eleanor will have a;$140,000 dividend.;$260,000 dividend.;$140,000 capital gain.;$260,000 capital gain.;None of the above.;Question 2;Which of the following entity owners cannot participate in management of the entity?;A general partner in a general partnership.;A member of a limited liability company.;A partner in a limited liability partnership.;A limited partner in a limited liability limited partnership.;None of the above.;Question 3;Elk, a C corporation, has $370,000 operating income and $290,000 operating expenses during the year. In addition, Elk has a $10,000 long-term capital gain and a $17,000 short-term capital loss. Elk?s taxable income is;$63,000.;$73,000.;$80,000.;$90,000.;None of the above.;Question 4;Which of the following statements is incorrect with respect to determining current E & P?;All tax-exempt income should be added back to taxable income.;Dividends received deductions should be added back to taxable income.;Charitable contributions in excess of the 10% of taxable income limit should be subtracted from taxable income.;Federal income tax refunds should be added back to taxable income.;None of the above statements are incorrect.;Question 5;Rachel is the sole member of an LLC, and Jordan is the sole shareholder of a C corporation. Both businesses were started in the current year, and each business has a long-term capital gain of $10,000 for the year. Neither business made any distributions during the year. With respect to this information, which of the following statements is correct?;The C corporation receives a preferential tax rate on the LTCG of $10,000.;The LLC must pay corporate tax on taxable income of $10,000.;Jordan must report $10,000 of LTCG on his tax return.;Rachel must report $10,000 of LTCG on her tax return.;None of the above.;Question 6;Fred and Ella are going to establish a business. They expect the business to be very successful in the long-run, but project losses of approximately $100,000 for each of the first five years. Due to potential environmental concerns, limited liability is a requisite for the owners. Which form of business entity should they select?;General partnership.;Limited partnership.;C corporation.;S corporation.;Any of the above should satisfy Fred and Ella.;Question 7;During 2013, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2012, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?;Nutt recognizes a $1,000 LTCG.;Nutt?s stock basis will be $2,000.;Nutt?s ordinary income is $15,000.;Nutt?s return of capital is $11,000.;None of the above.;question 9;In the current year, Warbler Corporation (E & P of $250,000) made the following property distributions to its shareholders (all corporations);AdjustedFair Market;BasisValuePink Corporation stock (held for investment) $150,000$120,000 Non-LIFO inventory 80,000110,000;Warbler Corporation is not a member of a controlled group. As a result of the distribution;The shareholders have dividend income of $200,000.;The shareholders have dividend income of $260,000.;Warbler has a recognized gain of $30,000 and a recognized loss of $30,000.;Warbler has no recognized gain or loss.;None of the above.;Question 10;Bev and Cabel each have 50% ownership in Finch Partnership. Bev?s partnership interest has a basis of $225,000. Finch?s taxable income for the current year is $100,000, and it distributes $180,000 to each partner. Bev?s partnership interest basis at the end of the year is;$0.;$45,000.;$95,000.;$100,000.;None of the above.;Question 11;Finch Corporation distributes property (basis of $225,000, fair market value of $300,000) to a shareholder in a distribution that is a qualifying stock redemption. The property is subject to a liability of $160,000, which the shareholder assumes. The basis of the property to the shareholder is;$0.;$140,000.;$225,000.;$300,000.
Paper#44830 | Written in 18-Jul-2015Price : $18