Exam 3: Corporations: Introduction and Operating Rules

Which of the following statements is correct regarding the taxation of C corporations?

Wanda is the Chief Executive Officer of Pink corporation, a publicly traded, calendar year C corporation. For the current year, Wanda's compensation package consists of: Cash compensation \ 2,500,000 Nontaxable fringe benefits 250,000 Taxable fringe benefits 150,000 Bonus tied to company performance 2,000,000 How much of Wanda's compensation is deductible by Pink Corporation?

Grebe Corporation, a closely held corporation that is not a PSC, had $75,000 of net active income, $60,000 of portfolio income, and a $105,000 passive activity loss during the year. How much of the passive activity loss can Grebe deduct in the current year?

Gerald, a cash basis taxpayer, owns 70% of the stock of Black Corporation, a calendar year, accrual basis C corporation. On December 31, 2019, Black accrued a bonus of $80,000 to Gerald, and paid the bonus to Gerald on January 2, 2020. When does Gerald report the bonus, and when does Black Corporation deduct the bonus? Would your answers change if Gerald was a 40% shareholder of Black?

Emerald Corporation, a calendar year C corporation, was formed and began operations on April 1, 2019. The following expenses were incurred during the first tax year April 1 through December 31, 2019) of operations. Expenses of temporary directors and of organizational meetings \ 27,000 Fee paid to the state of incorporation 1,000 Accounting services incident to organization 15,500 Legal services for drafting the corporate charter and bylaws 9,500 Expenses incident to the printing and sale of stock certificates 6,000 Assuming a § 248 election, what is the Emerald's deduction for organizational expenditures for 2019?