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Question;Juanita owns 45% of the stock in a C corporation that had a profit of $120,000;in 2011. Carlos owns a 45% interest in a partnership that had a profit of;$120,000 during the year. The corporation distributed $20,000 to Juanita, and;the partnership distributed $20,000 to Carlos. Which of the following;statements relating to 2011 is incorrect?;a.;Juanita must report $20,000 of income from the corporation.;b. The corporation must pay corporate;tax on $120,000 of income.;c. Carlos must report $20,000 of income;from the partnership.;d. The partnership is not subject to a;Federal entity-level income tax.;e. None of the above.;120.46;Bjorn owns a 60% interest in an S corporation that earned $150,000 in 2011. He;also owns 60% of the stock in a C corporation that earned $150,000 during the;year. The S corporation distributed $30,000 to Bjorn and the C corporation paid;dividends of $30,000 to Bjorn. How much income must Bjorn report from these;businesses?;a.;$0 income from the S corporation and $30,000 income from the C corporation.;b. $90,000 income from the S corporation;and $30,000 income from the C corporation.;c. $90,000 income from the S corporation;and $0 income from the C corporation.;d. $30,000 income from the S corporation;and $30,000 of dividend income from the C corporation.;e. None of the above.;121.47;Luis is the sole shareholder of a C corporation, and Eduardo owns a sole;proprietorship. Both businesses were started in 2011, and each business has a;long-term capital gain of $20,000 for the year. Neither business made any;distributions during the year. With respect to this information, which of the;following statements is incorrect?;a.;Eduardo must report a $20,000 long-term capital gain on his 2011 tax return.;b. Louis?s corporation does not receive;a preferential tax rate on the $20,000 long-term capital gain.;c. Luis must report a $20,000 long-term;capital gain on his 2011 tax return.;d. Eduardo receives a preferential tax;rate on a long-term capital gain of $20,000.;e. None of the above.;122.48;Norma formed Hyacinth Enterprises, a proprietorship, in 2011. In its first;year, Hyacinth had operating income of $400,000 and operating expenses of;$240,000. In addition, Hyacinth had a long-term capital loss of $10,000. Norma;the proprietor of Hyacinth Enterprises, withdrew $75,000 from Hyacinth during;the year. Assuming Norma has no other capital gains or losses, how does this;information affect her taxable income for 2011?;a.;Increases Norma?s taxable income by $75,000.;b. Increases Norma?s taxable income by;$160,000.;c. Increases Norma?s taxable income by;$150,000 ($160,000 ordinary business income ? $10,000 long-term capital loss).;d. Increases Norma?s taxable income by;$157,000 ($160,000 ordinary business income ? $3,000 long-term capital loss).;e. None of the above.;123.49;Francisco is the sole owner of Rose Company. For 2011, the only income of Rose;was a long-term capital gain of $25,000. The business made no distributions;during the year to Francisco. Irrespective of Rose Company, Francisco?s;marginal tax rate is 35% and he has no capital asset transactions. Which of the;following statements is incorrect?;a.;If Rose Company is a sole proprietorship or S corporation, Francisco must;report the $25,000 long-term capital gain on his personal income tax return.;b. If Rose Company is a C corporation;Francisco will report none of the $25,000 long-term capital gain on his;personal income tax return.;c. If Rose Company is a sole;proprietorship or S corporation, a preferential tax rate applies to the $25,000;long-term capital gain.;d. If Rose Company is a C corporation, a;preferential tax rate does not apply to the $25,000 long-term capital gain.;e. None of the above.;124.50;Glen and Michael are equal partners in Trout Enterprises, a calendar year;partnership. During the year, Trout Enterprises had gross income of $400,000;and operating expenses of $220,000. In addition, the partnership sold land that;had been held for investment purposes for a long-term capital gain of $100,000.;During the year, Glen withdrew $60,000 from the partnership, and Michael;withdrew $60,000. Discuss the impact of this information on the taxable income;of Trout, Glen, and Michael.;a.;Trout pays tax on $0 income, Glen?s taxable income increases by $60,000, and;Michael?s taxable income increases by $60,000.;b. Trout pays tax on $280,000 income;Glen?s taxable income increases by $60,000, and Michael?s taxable income;increases by $60,000.;c. Trout pays tax on $0 income, Glen?s;taxable income increases by $200,000, and Michael?s taxable income increases by;$200,000.;d. Trout pays tax on $0 income, Glen?s;taxable income increases by $140,000, and Michael?s taxable income increases by;$140,000.;e. None of the above.;125.51;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;a.;$90,000.;b. $80,000.;c. $73,000.;d. $63,000.;e. None of the above.;126.52;Flycatcher Corporation, a C corporation, has two equal individual shareholders;Nancy and Pasqual. In the current year, Flycatcher earned $200,000 net profit;and paid a dividend of $40,000 to each shareholder. Regardless of any tax;consequences resulting from their interests in Flycatcher, Nancy is in the 28%;marginal tax bracket and Pasqual is in the 35% marginal tax bracket. With;respect to the current year, which of the following statements is incorrect?;a.;Flycatcher can avoid the corporate tax altogether by paying out all $200,000 of;net profit as dividends to the shareholders.;b. Nancy incurs income tax of $6,000 on;her dividend income.;c. Pasqual incurs income tax of $6,000;on his dividend income.;d. Flycatcher pays corporate tax on;$200,000.;e. None of the above.;127.53;Which of the following statements is incorrect;about LLCs and the check-the-box Regulations?;a.;A limited liability company with one owner can elect to be taxed as a;corporation.;b. All 50 states have passed laws that;allow LLCs.;c. An entity with more than one owner;and formed as a corporation cannot elect to be taxed as a partnership.;d. If a limited liability company with;one owner does not make an election, the entity is taxed as a sole;proprietorship.;e. If a limited liability company with;more than one owner does not make an election, the entity is taxed as a;corporation.;128.54;Patrick, an attorney, is the sole shareholder of Gander Corporation. Gander is;a personal service corporation with a fiscal year ending September 30. The;corporation paid Patrick a salary of $294,000 during its fiscal year ending;September 30, 2011. How much salary must Gander pay Patrick during the period;October 1 through December 31, 2011, to permit the corporation to continue to;use its fiscal year without negative tax effects?;a.;$0.;b. $73,500.;c. $220,500.;d. $294,000.;e. None of the above.;129.55;Jason, an architect, is the sole shareholder of Purple Corporation, a personal;service corporation. The corporation paid Jason a salary of $225,000 during its;fiscal year ending October 31, 2011. How much salary must Purple pay Jason;during the period November 1 through December 31, 2011, to permit the;corporation to continue to use its fiscal year without negative tax effects?;a.;$18,750.;b. $37,500.;c. $187,500.;d. $225,000.;e. None of the above.;130.56;Falcon Corporation, a C corporation, had gross receipts of $3 million in 2008;$7 million in 2009, and $6 million in 2010. Hawk Corporation, a personal;service corporation (PSC), had gross receipts of $3 million in 2008, $5 million;in 2009, and $4 million in 2010. Which of the corporations will be allowed to;use the cash method of accounting in 2011?;a.;Neither Falcon Corporation nor Hawk Corporation.;b. Both Falcon Corporation and Hawk Corporation.;c. Falcon Corporation only.;d. Hawk Corporation only.;e. None of the above.;131.57;Ivory Corporation, a calendar year, accrual method C corporation, has two cash;method, calendar year shareholders who are unrelated to each other. Craig owns;55% of the stock, and Oscar owns the remaining 45%. During 2011, Ivory paid a;salary of $200,000 to each shareholder. On December 31, 2011, Ivory accrued a;bonus of $50,000 to each shareholder. Assuming that the bonuses are paid to the;shareholders on February 1, 2012, compute Ivory Corporation?s 2011 deduction;for the above amounts.;a.;$0.;b. $250,000.;c. $400,000.;d. $450,000.;e. $500,000.;132.58;On December 31, 2011, Peregrine Corporation, an accrual method, calendar year;taxpayer, accrued a performance bonus of $100,000 to Charles, a cash basis;calendar year taxpayer. Charles is president and sole shareholder of the corporation.;When can Peregrine deduct the bonus?;a.;In 2011, if the bonus was authorized by the Board of Directors and payment was;made on or before March 15, 2012.;b. In 2012, if payment was made at any;time during that year.;c. In 2011, if payment was made on or;before March 15, 2012.;d. In 2012, but only if payment was made;on or before March 15, 2012.;e. None of the above.;133.59;Bear Corporation has a net short-term capital gain of $35,000 and a net;long-term capital loss of $200,000 during 2011. Bear Corporation has taxable;income from other sources of $600,000. Prior years? transactions included the;following;2007;Net short-term capital gain;$45,000;2008;Net long-term capital gain;20,000;2009;Net short-term capital gain;55,000;2010;Net long-term capital gain;30,000;Compute the amount of Bear?s capital loss carryover to 2012.;a.;$0.;b. $60,000.;c. $105,000.;d. $165,000.;e. $200,000.;134.60;In 2011, Bluebird Corporation had net income from operations of $75,000.;Further, Bluebird recognized a long-term capital loss of $30,000, and a;short-term capital gain of $10,000. Which of the following statements is;correct?;a.;Bluebird Corporation may use the capital loss to offset the capital gain and;must carry the net capital loss of $20,000 forward five years as a long-term;capital loss.;b. Bluebird Corporation may deduct;$13,000 of the capital loss in 2011 and may carry forward the remainder of the;capital loss indefinitely to offset capital gains.;c. Bluebird Corporation will have;taxable income in 2011 of $55,000.;d. Bluebird Corporation will have;taxable income in 2011 of $75,000 and will have a net capital loss of $20,000;that can be carried back 3 years and forward 5 years.;e. None of the above.;135.61;Jade Corporation, a C corporation, had $100,000 operating income and $40,000;operating expenses during the year. In addition, Jade had a $2,000 long-term;capital gain and a $10,000 short-term capital loss. Compute Jade?s taxable;income for the year.;a.;$52,000.;b. $57,000.;c. $60,000.;d. $62,000.;e. None of the above.;136.62;Beige Corporation, a C corporation, purchases a warehouse on December 4, 2002;for $500,000. Straight-line depreciation is taken in the amount of $104,701;before the property is sold on February 8, 2011, for $600,000. What is the;amount and character of the gain recognized by Beige on the sale of the realty?;a.;Ordinary income of $0 and ? 1231 gain of $204,701.;b. Ordinary income of $104,701 and;1231 gain of $100,000.;c. Ordinary income of $40,940 and ? 1231;gain of $163,760.;d. Ordinary income of $20,940 and ? 1231;gain of $183,761.;e. None of the above.;137.63;During the current year, Thrasher, Inc., a closely held personal service;corporation, has $67,500 of active business income, $52,500 of portfolio;income, and $120,000 of passive loss. How much of the passive loss can Thrasher;deduct in the current year?;a.;$0.;b. $52,500.;c. $67,500.;d. $120,000.;e. None of the above.;13864;Azul Corporation, a personal service corporation, had $300,000 of active;income, $40,000 of portfolio income, and a $190,000 passive loss during the;year. How much is Azul?s taxable income?;a.;$110,000.;b. $150,000.;c. $300,000.;d. $340,000.;e. None of the above.

 

Paper#59205 | Written in 18-Jul-2015

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