Question;170. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest96;Warbler Corporation, an accrual method regular corporation, was formed and;began operations on March 1, 2011. The following expenses were incurred during;its first year of operations (March 1 - December 31, 2011);Expenses of;temporary directors and organizational meetings;$25,000;Incorporation;fee paid to state;2,000;Expenses;incurred in printing and selling stock certificates;10,000;Accounting;services incident to organization;12,000;a.;Assuming a;valid election under ? 248 to amortize organizational expenditures, what is;the amount of Warbler?s deduction for 2011?;b.;Same as a.;except that Warbler also incurred in 2011 legal fees of $15,000 for the;drafting of the corporate charter and bylaws. What is the amount of Warbler?s;2011 deduction for organizational expenditures?;171. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest97;In each of the following independent situations, determine the corporation?s;income tax liability. Assume that all corporations use a calendar year and that;the year involved is 2011.;Taxable Income;Violet;Corporation;$ 22,000;Indigo;Corporation;90,000;Orange;Corporation;220,000;Blue;Corporation;5,100,000;Green;Corporation;19,800,000;172. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest98;Almond Corporation, a calendar year C corporation, had taxable income of;$900,000, $1.1 million, and $790,000 for 2008, 2009, and 2010, respectively.;Almond?s taxable income is $1.5 million for 2011. Compute the minimum estimated;tax payments for 2011 for Almond Corporation.;173. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest99;Heron Corporation, a calendar year, accrual basis taxpayer, provides the;following information for this year and asks you to prepare Schedule M-1;Net income;per books (after-tax);$257,950;Taxable;income;150,000;Federal;income tax liability;41,750;Interest;income from tax-exempt bonds;15,000;Interest;paid on loan incurred to purchase tax-exempt bonds;1,500;Life;insurance proceeds received as a result of death of Heron?s president;150,000;Premiums;paid on policy on life of Heron?s president;7,800;Excess of;capital losses over capital gains;6,000;Retained;earnings at beginning of year;375,000;Cash dividends;paid;90,000;175. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Ques101;Osprey Company had a net loss of $200,000 from merchandising operations in;2011, its first year of operations. Mary, the sole owner of Osprey, works full;time in the business. She has a large amount of income from other sources and;is in the 35% marginal tax bracket irrespective of Osprey. Considering this;information, compare the affect of Osprey?s loss to Mary under the various;types of entity forms discussed in the chapter.;176. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Ques102;Shareholders of closely held C corporations frequently engage in transactions;that produce a tax benefit to the corporations. In many cases, shareholders;receive compensation for employment with closely held corporations, and such;payments generate a deduction for the corporations. To avoid the double;taxation effect, shareholders generally prefer these and other corporate;deductible payments over dividend distributions. Explain how this strategy;avoids double taxation, including examples of other shareholder-corporation;transactions that could be used for such purpose. Also, discuss the possible;pitfalls surrounding corporate payments to shareholders.;177. CHAPTER 2?CORPORATIONS;INTRODUCTION AND OPERATING RULES Ques103;Nancy is a 40% shareholder and president of Robin Corporation, a regular;corporation. The board of directors of Robin has decided to pay Nancy a;$250,000 bonus for the year based on her outstanding performance. The directors;want to pay the $250,000 as salary, but Nancy would prefer to have it paid as a;dividend. If both Robin Corporation and Nancy are in a 35% marginal tax bracket;irrespective of the treatment of the bonus, discuss which form of payment would;be most beneficial for each party. (Ignore any employment tax considerations.);179. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Ques105;Describe the Federal tax treatment of entities formed as limited liability;companies.;180. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Ques106;Compare the taxation of C corporations with that of individual taxpayers.;Provide several examples of similarities and differences in your discussion.;181. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Ques107;Explain the rules regarding the accounting periods available to corporate;taxpayers.
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