Question 1

Carlota owns 4% of Express Corporation and has a basis of $5,000 in her stock. During the year, Express distributes a $300,000 dividend. As a result of the dividend, Carlota has

Accepted Answer

A)   $12,000 of dividend income.
B)   $5,000 of dividend income and $7,000 of capital gain.
C)   $7,000 of dividend income and a $5,000 tax-free return of capital.
D)   $5,000 of dividend income, $5,000 tax-free return of capital, and a $2,000 capital gain.
E)   $7,000 capital gain. A

Question 2

At the beginning of the current year, Harrison's adjusted basis in FLM Partnership is $50,000. During the year, Harrison receives a cash distribution of $25,000. How much income must Harrison recognize because of the cash received?

Accepted Answer

A)   $- 0 -
B)   $10,000
C)   $15,000
D)   $20,000
E)   $25,000 A

Question 3

Roy receives a nonliquidating distribution from Ageless Corporation. Which of the following statements concerning nonliquidating distributions from a corporation are correct? I. A nonliquidating cash distribution is taxable if the distribution comes from the corporation's current or accumulated earnings and profits. II. The amount of the dividend on a nonliquidating distribution of property is the basis of the property distributed.

Accepted Answer

A)   Only statement I is correct.
B)   Only statement II is correct.
C)   Both statements are correct.
D)   Neither statement is correct. A

Question 4

During the current year, Campbell Corporation receives dividend income of $40,000 from a 5%-owned domestic corporation. What is Campbell's maximum allowable dividend-received deduction for the current year?

Accepted Answer

A)   $- 0 -
B)   $28,000
C)   $32,000
D)   $36,000
E)   $40,000

Question 5

Micaela owns all the shares of the Madison Corporation that operates as an S corporation. Micaela's basis in the stock is $40,000. During the year she receives a cash distribution of $10,000 from Madison. What must Micaela and Madison report as income from the cash distribution?

Accepted Answer

The answer of Micaela owns all the shares of the...

Question 6

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?

Accepted Answer

A)   $12,000
B)   $46,000
C)   $54,000
D)   $74,000
E)   $76,000

Question 7

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?

Accepted Answer

A)   $- 0 -
B)   $48,000
C)   $56,000
D)   $60,000
E)   $70,000

Question 8

Pluto Corporation contributes $30,000 to qualified charitable organizations during 2014. Pluto's 2014 taxable income before any charitable contribution deduction is $280,000. Included in that amount is a $10,000 dividend-received deduction amount. Pluto also has a carryover charitable contribution of $2,000 from 2013. What is the maximum amount Pluto Corporation can deduct as a charitable contribution for 2014?

Accepted Answer

A)   $- 0 -
B)   $28,000
C)   $29,000
D)   $30,000
E)   $35,000

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Mariana is a partner in the Benson Partnership. At the close of the current year, Mariana's basis in the partnership is $23,000. At that time, the partnership distributes cash of $6,000 and property with a basis of $4,000 and a fair market value of $7,000 to each partner. What amount must Mariana report as income from the distribution in the current year?

Accepted Answer

A)   $- 0 -
B)   $4,000
C)   $6,000
D)   $10,000
E)   $13,000

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

If a sole proprietorship has a net operating loss for the current period, the loss can only be used to offset other business income in the current year. Any current loss can be carried back three years and forward five years and used to offset business income in those years.

Accepted Answer

A) True 
 B)False

Question 13

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?

Accepted Answer

A)   $8,000
B)   $15,000
C)   $18,000
D)   $25,000
E)   $50,000

Question 14

Harrison Corporation sells a building for $330,000 in the current year. Harrison purchased the building in 2008 for $250,000 and had taken $20,000 in depreciation on the building up to the date of its sale. How should Harrison report the gain on the sale of the building?

Accepted Answer

A)   Section 1231 gain of $100,000.
B)   Ordinary income of $100,000.
C)   Section 1231 gain of $80,000 and ordinary income of $20,000.
D)   Section 1231 gain of $96,000 and ordinary income of $4,000.
E)   Ordinary income of $96,000 and Section 1231 gain of $4,000.

Question 15

A corporation's excess charitable contributions over the amount deductible

Accepted Answer

A)   May be carried back two years and forward 20 years.
B)   May be carried back or forward for two years at the corporation's election.
C)   May be carried forward for a maximum of five succeeding years.
D)   Is not deductible in any future or prior year.

Question 16

Brooks Corporation distributes property with a basis of $20,000 and a fair market value of $25,000 to Caroline in complete liquidation of the corporation. Caroline's basis in the stock is $32,000. What must Caroline and Brooks report as income loss) upon the liquidation of Brooks?

Accepted Answer

The answer of Brooks Corporation distributes property with a basis...

Question 17

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?

Accepted Answer

A)   $-0-
B)   $10,000
C)   $12,000
D)   $40,000

Question 18

Sensor Corporation was formed and began operations in 2012. For that year, it had operating income of $50,000, long-term capital gains of $25,000 and short-term capital losses of $10,000. In 2013, the corporation had $5,000 of net long-term capital losses, and in 2014 the corporation had $20,000 of net long-term capital losses. How much capital loss is available to carry forward to 2015?

Accepted Answer

A)   $- 0 -
B)   $10,000
C)   $15,000
D)   $20,000
E)   $25,000

Question 19

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.

Accepted Answer

A)   Only statement I is correct.
B)   Only statement II is correct.
C)   Both statements are correct.
D)   Neither statement is correct.

Question 20

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:

Accepted Answer

A)   $162,000
B)   $167,000
C)   $172,000
D)   $187,000
E)   $192,000

Exam 14: Choice of Business Entity-Operations and Distributions

Carlota owns 4% of Express Corporation and has a basis of $5,000 in her stock. During the year, Express distributes a $300,000 dividend. As a result of the dividend, Carlota has

At the beginning of the current year, Harrison's adjusted basis in FLM Partnership is $50,000. During the year, Harrison receives a cash distribution of $25,000. How much income must Harrison recognize because of the cash received?

During the current year, Campbell Corporation receives dividend income of $40,000 from a 5%-owned domestic corporation. What is Campbell's maximum allowable dividend-received deduction for the current year?

Micaela owns all the shares of the Madison Corporation that operates as an S corporation. Micaela's basis in the stock is $40,000. During the year she receives a cash distribution of $10,000 from Madison. What must Micaela and Madison report as income from the cash distribution?

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?

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

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

If a sole proprietorship has a net operating loss for the current period, the loss can only be used to offset other business income in the current year. Any current loss can be carried back three years and forward five years and used to offset business income in those years.

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?

Harrison Corporation sells a building for $330,000 in the current year. Harrison purchased the building in 2008 for $250,000 and had taken $20,000 in depreciation on the building up to the date of its sale. How should Harrison report the gain on the sale of the building?

A corporation's excess charitable contributions over the amount deductible

Brooks Corporation distributes property with a basis of $20,000 and a fair market value of $25,000 to Caroline in complete liquidation of the corporation. Caroline's basis in the stock is $32,000. What must Caroline and Brooks report as income loss) upon the liquidation of Brooks?

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.