Exam 14: Choice of Business Entity -- Operations and Distributions

Toliver Corporation incurs a long-term capital loss of $38,000 and a short-term capital gain of $33,000.Also,Toliver has operating income of $175,000.What is Toliver's taxable income?

Peter owns 30% of Bear Company,an electing S corporation.Peter's adjusted basis in the stock is $44,000 at the beginning of the current year.During the current year,Bear distributes a $60,000 dividend.Bear Company reports a $200,000 operating loss for the current year.If Peter is a material participant in Bear Company,how much of the loss can he deduct on his income tax return?

Virginia is the sole shareholder in Barnes Inc. ,an electing S corporation.During the current year,Barnes has operating income of $64,000,interest income of $10,000 from investments,and passive losses from investments in limited partnerships of $20,000.Barnes Corporation pays $12,000 in dividends.What is Virginia's taxable income from Barnes for the current year?

Fender Corporation makes a cash distribution of $40,000 to Gibson in complete liquidation of the corporation.Gibson's basis in Fender stock is $18,000.What must Gibson report as income from the cash distribution?

Match the term with the entity to which it applies. -Not a separate entity

During the current year,Hope Corporation has the following items of income and expense: ​ Hope owns 10% of the domestic corporation that distributed the dividends to Hope.Determine Hope Corporation's net operating loss for the current year.

Roger owns 25% of Silver Trucking,a partnership.During the current year,Roger sells a truck with an adjusted basis of $25,000 to Silver for $18,000. I.Silver's basis in the truck is $25,000. II.Roger can deduct the $7,000 loss on the sale of the truck. ​

During the current year,Timepiece Corporation has operating income of $460,000 and dividend income of $70,000 from 45% owned domestic corporations.Total operating expenses for the year are $470,000.What is Timepiece's dividends-received deduction for the current year?

Jane receives a nonliquidating distribution of land with a fair market value of $30,000 and a basis of $18,000 from Strickland Corporation,an S corporation.Jane's basis in the stock is $46,000.What must Jane and Strickland report as income from the property distribution? Jane Strickland

The amount of the dividend on a nonliquidating corporate distribution of property is the fair value of the property.

Martin and Joe are equal partners in Ferrell Company.For the current year,Ferrell Company reports the following items of income and expense: ​ In addition to his Ferrell Company earnings,Martin has other income of $35,000.Included in the $35,000 is a $10,000 loss from the sale of land held as an investment.Martin's adjusted gross income is:

Henritta is the sole shareholder of Quaker Corporation.Quaker's income from operations for the current year is $600,000.Included in the $600,000 amount are dividends of $10,000 from the stock of a 4%-owned corporation.Also included in the $600,000 is a $4,000 long-term loss realized on the sale of a stock investment in an unaffiliated corporation.To compute taxable income for the current year,Henritta should deduct a capital loss of

Discuss two tax-planning techniques that can be used by a 100% owner-employee to reduce his/her tax liability.

Match the term with the entity to which it applies. -Separate entity that never pays income taxes

Since Wisher,Inc.owns 80% of Patriot,Inc.(a U.S.corporation)the dividend received deduction rate is 100%.

When a partner receives a cash distribution from a partnership,the distribution is never taxable even if the amount of cash received is greater than the partner's basis in the partnership.

Ed's adjusted basis in his partnership interest at the beginning of the tax year is $35,000.The partnership has operating income of $20,000 for the current year.Ed is a 50% partner,and he receives a current distribution of $40,000 cash this year.What is (are)the tax effect of these events? I.Ed recognizes $10,000 of ordinary income from the partnership for the year. II.Ed recognizes $40,000 of ordinary income due to the distribution. III.Ed's adjusted basis in his partnership interest at the close of the tax year is zero. ​

Advantages of hiring one's own children to work in her/his business enterprise include which of the following? I.The corporation can deduct wages paid to the children for work performed. II.The corporation is required to pay Social Security taxes on the children's earnings. ​

Sales of property between a partner who owns more than 50% of a partnership's interest and the partnership are subject to the related party rules.

Marian owns 40% of Addison Company,a partnership.Marian's adjusted basis in the partnership is $32,000 at the beginning of the year.During the current year,Marian receives a $10,000 cash distribution from the partnership.Addison Company reports a $100,000 operating loss for the current year.If Marian is not a material participant in Addison Company and has no other passive activities,how much of the partnership loss can she deduct on her income tax return?