Exam 17: Corporations: Introduction and Operating Rules

Pelican,Inc. ,a closely held corporation (not a PSC),has a $350,000 loss from a passive activity,$135,000 of active income,and $160,000 of portfolio income.How much is Pelican's taxable income?

Orange Corporation owns stock in White Corporation and has net operating income of $400,000 for the year.White Corporation pays Orange a dividend of $60,000.What amount of dividends received deduction may Orange claim if it owns 15% of White stock (assuming Orange's dividends received deduction is not limited by its taxable income)?

For purposes of the estimated tax payment rules,a "large corporation" is defined as a corporation that had an average taxable income of $1 million or more over the preceding three-year period.

Herman and Henry are equal partners in Badger Enterprises,a calendar year partnership.During the year,Badger Enterprises had $305,000 gross income and $230,000 operating expenses.Badger made no distributions to the partners.Badger must pay tax on $75,000 of income.

Egret Corporation,a calendar year C corporation,had an excess charitable contribution for 2009 of $15,000.In 2010,it made a further charitable contribution of $20,000.Its 2010 deduction is limited to $25,000 (10% of taxable income).In applying the 10% limitation,the $15,000 carryover is used before the current year contribution.

Beige Corporation,a C corporation,purchases a warehouse on December 4,2001,for $500,000.Straight-line depreciation is taken in the amount of $104,701 before the property is sold on February 8,2010,for $600,000.What is the amount and character of the gain recognized by Beige on the sale of the realty?

Elk,a C corporation,has $500,000 operating income and $350,000 operating expenses during the year.In addition,Elk has a $20,000 long-term capital gain and a $52,000 short-term capital loss.Elk's taxable income is:

Copper Corporation owns stock in Bronze Corporation and has net operating income of $900,000 for the year.Bronze Corporation pays Copper a dividend of $150,000.What amount of dividends received deduction may Copper claim if it owns 65% of Bronze stock (assuming Copper's dividends received deduction is not limited by its taxable income)?

Under the "check-the-box" Regulations,a single-member LLC that fails to elect to be treated as a corporation will be taxed as a sole proprietorship.

Bjorn owns a 35% interest in an S corporation that earned $200,000 in 2010.He also owns 10% of the stock in a C corporation that earned $200,000 during the year.The S corporation distributed $10,000 to Bjorn and the C corporation paid dividends of $10,000 to Bjorn.How much income must Bjorn report from these businesses?

Osprey Company had a net loss of $200,000 from merchandising operations in 2010,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.

Ostrich,a C corporation,has a net short-term capital gain of $40,000 and a net long-term capital loss of $180,000 during 2010.Ostrich also has taxable income from other sources of $1 million.Prior years' transactions included the following:

Emerald Corporation,a calendar year C corporation,was formed and began operations on July 1,2010.The following expenses were incurred during the first tax year (July 1 through December 31,2010)of operations: Assuming a § 248 election,what is the Emerald's deduction for organizational expenditures for 2010?

On December 20,2010,the directors of Quail Corporation (an accrual basis,calendar year taxpayer)authorized a cash donation of $5,000 to the American Cancer Society,a qualified charity.The payment,which is made on April 15,2011,may be claimed as a deduction for tax year 2010.

Juanita owns 45% of the stock in a C corporation that had a profit of $120,000 in 2010.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 2010 is incorrect?

Albatross,a C corporation,had $125,000 net income from operations and a $10,000 short-term capital loss in 2010.Albatross Corporation's taxable income is $115,000.

Falcon Corporation,a C corporation,had gross receipts of $3 million in 2007,$7 million in 2008,and $6 million in 2009.Hawk Corporation,a personal service corporation (PSC),had gross receipts of $3 million in 2007,$5 million in 2008,and $4 million in 2009.Which of the corporations will be allowed to use the cash method of accounting in 2010?

Donald owns a 40% interest in a partnership that earned $140,000 in the current year.He also owns 40% of the stock in a C corporation that earned $140,000 during the year.Donald received $30,000 in distributions from each of the two entities during the year.With respect to this information,Donald must report $60,000 of income on his individual income tax return for the year.

Jake,the sole shareholder of Peach Corporation,a C corporation,has the corporation pay him $100,000.For tax purposes,Peach would prefer to have the payment treated as salary instead of dividend.

On December 30,2010,the board of directors of Gull Corporation,a calendar year,accrual method C corporation,authorized a contribution of $50,000 to a qualified charitable organization.For purposes of the taxable income limitation applicable to charitable deductions,Gull has taxable income of $420,000 and $370,000 for 2010 and 2011,respectively.Describe the tax consequences to Gull Corporation under the following independent situations.