Exam 14: Choice of Business Entity-Operations and Distributions

Mario receives a liquidating distribution of land with a fair market value of $19,000 and a basis of $15,000 from Blithe Corporation, an S corporation. Mario's basis in the stock is $21,000. What must Mario and Blithe report as income (loss) from the property distribution? Malcolm Blithe A) $\$-0- \quad \$-0-$ B) $\$(2,000) \quad \$4,000$ C) $\$(6,000) \quad \$-0-$ D) $\$(6,000) \quad \$4,000$ ?

During the current year the Newport Partnership is liquidated. Which of the following statements is correct concerning the liquidation of the partnership? I.If only cash is distributed by the partnership, the partners must recognize a gain but cannot recognize a loss. II.Gain is recognized only if the amount of cash and property distributed exceeds the partner's basis in the partnership. ​

Roger owns 65% of Silver Trucking, a partnership. During the current year, Roger sells a truck with an adjusted basis of $30,000 to Silver for $20,000. I.Silver's basis in the truck is $30,000. II.Roger can deduct the $10,000 loss on the sale of the truck. ​

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

During the current year, Metcalf Corporation has the following items of income and expense: ? Sales \ 450,000 Cost of goods sold 320,000 Dividends received 20,000 Metcalf owns 37% of the corporation that distributed the dividend to Metcalf. Determine the amount reported as income before special deductions for the current year.

Tippecanoe Corporation has the following income and expense items during the current year: ? Net income from operations \ 60,000 Dividend income from 10\% owned corp oration 180,000 What is Tippecanoe 's dividends-received deduction?

Hawkins Corporation has $50,000 of taxable income before special deductions. Taxable income includes an operating loss carryforward of $10,000 and $60,000 of dividend income received from other corporations in which Hawkins owns less than a 20% interest. What is Hawkins' taxable income?

A sole proprietor may deduct investment interest and investment expense without limitations if investments are made in the name of the business.

During the current year, Mars Corporation receives dividend income of $20,000 from an 85%-owned domestic corporation. What is Mars' maximum allowable dividend-received deduction for the current year?

Rinaldo owns 20% of Mahoney Company, a partnership. Rinaldo's adjusted basis in the partnership is $32,000 at the beginning of the current year. During the current year, Rinaldo receives a $10,000 cash distribution from the partnership. Mahoney Company reports a $200,000 operating loss for the current year. Which of the following statements is/are correct? I.Rinaldo's maximum loss deduction is limited to $22,000. II.If Rinaldo is a material participant in Mahoney, he can deduct a $40,000 loss. ​

The Polaris S Corporation has operating income of $50,000. Andrew is the sole shareholder of the corporation that has had the S election in effect since its inception. At the beginning of the current year, Andrew's basis in his S corporation stock is $2,000. During the year Andrew receives cash distributions totaling $55,000. How much income must Andrew recognize for the current tax year?

During the current year, Hope Corporation has the following items of income and expense: ? Sales \ 420,000 Expenses from operations 480,000 Dividends received 100,000 Hope owns 10% of the domestic corporation that distributed the dividends to Hope. Determine Hope Corporation's net operating loss for the current year.

Pablo owns 30% of Cancun Company, an electing S corporation. Pablo's adjusted basis in the stock is $44,000 at the beginning of the current year. During the current year, Cancun distributes a $60,000 dividend. Cancun Company reports a $200,000 operating loss for the current year. If Pablo is not a material participant in Cancun Company, how much of the loss can he deduct on his income tax return?

Serenity receives a nonliquidating distribution from the Hickock Corporation, an S corporation. Which of the following statements concerning nonliquidating distributions from an S corporation are correct? I.A nonliquidating cash distribution is taxable if the amount distributed exceeds Serenity's basis in Hickock. II.The amount of the dividend on a nonliquidating distribution of property is the fair market value of the property distributed. ​

Olivia owns 40% of Addison Company, a partnership. Olivia's adjusted basis in the partnership is $22,000 at the beginning of the year. During the current year, Olivia receives a $10,000 cash distribution from the partnership. Addison Company reports a $100,000 operating loss for the current year. If Olivia is a material participant in Addison Company, how much of the partnership loss can she deduct on her income tax return?

Louise is the marketing manager and a 30% owner of Walker Company. At the beginning of the current year, Louise's basis in Walker Company is $22,000. During the year, Walker borrows $50,000 to finance the construction of a new building. For the year, Walker suffers a $100,000 net operating loss and distributes $60,000 in cash to its owners. Determine Louise's deductible loss if Walker is organized as a.A partnership b.A corporation c.An S corporation

Withdrawals of cash by a partner are taxable.

Bronco Corporation realizes $270,000 from sales during the current year. Bronco also receives $20,000 of dividends from a 2% owned corporation. Operating expenses totals $275,000. Bronco's taxable income is

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.