Question 1

Robin Corporation, a calendar year C corporation, had taxable income of $1.9 million, $1.2 million, and $900,000 for 2013, 2014, and 2015, respectively. Robin has taxable income of $1.5 million for 2016. The minimum 2016 estimated tax installment payments for Robin are:

Accepted Answer

A)  April 15, 2016, $76,500; June 15, 2016, $76,500; September 15, 2016, $76,500; December 15, 2016, $76,500.
B)  April 15, 2016, $110,500; June 15, 2016, $127,500; September 15, 2016, $127,500; December 15, 2016, $127,500.
C)  April 15, 2016, $127,500; June 15, 2016, $127,500; September 15, 2016, $127,500; December 15, 2016, $127,500.
D)  April 15, 2016, $76,500; June 15, 2016, $178,500; September 15, 2016, $127,500; December 15, 2016, $127,500.
E)  None of the above.F) B) and D)
G) C) and D)

Question 2

For § 351 purposes, stock rights and stock warrants are included in the definition of "stock."

Accepted Answer

A) True 
 B)False

Question 3

Wade and Paul form Swan Corporation with the following investments. Wade transfers machinery (basis of $40,000 and fair market value of $100,000) , while Paul transfers land (basis of $20,000 and fair market value of $90,000)  and services rendered (worth $10,000)  in organizing the corporation. Each is issued 25 shares in Swan Corporation. With respect to the transfers:

Accepted Answer

A)  Wade has no recognized gain; Paul recognizes income/gain of $80,000.
B)  Neither Wade nor Paul has recognized gain or income on the transfers.
C)  Swan Corporation has a basis of $30,000 in the land transferred by Paul.
D)  Paul has a basis of $30,000 in the 25 shares he acquires in Swan Corporation.
E)  None of the above.F) D) and E)
G) B) and D)

Question 4

Wren Corporation (a minority shareholder in Lark Corporation)  has made loans to Lark Corporation that become worthless in the current year.

Accepted Answer

A)  Wren Corporation is not permitted a deduction for the loans.
B)  The loans result in a nonbusiness bad debt deduction to Wren Corporation.
C)  The loans provide Wren Corporation with a business bad debt deduction.
D)  Wren claims a capital loss due to the uncollectible loans.
E)  None of the above.F) None of the above
G) B) and D)

Question 5

Income that is included in net income per books but not included in taxable income is a subtraction item on Schedule M-1.

Accepted Answer

A) True 
 B)False

Question 6

Kirby and Helen form Red Corporation. Kirby transfers property, basis of $20,000 and value of $300,000, for 100 shares in Red Corporation. Helen transfers property, basis of $40,000 and value of $280,000, and provides legal services in organizing the corporation. The value of her services is $20,000. In return Helen receives 100 shares in Red Corporation. With respect to the transfers:

Accepted Answer

A)  Kirby will recognize gain.
B)  Helen will not recognize any gain or income.
C)  Red Corporation will have a basis of $280,000 in the property it acquired from Helen.
D)  Red will have a business deduction of $20,000.
E)  None of the above.F) A) and B)
G) A) and D)

Question 7

George (an 80% shareholder)  has made loans to Mountainview Corporation that become worthless in the current year. George is not employed by Mountainview.

Accepted Answer

A)  George is not permitted a deduction for the worthless loans.
B)  The loans provide a nonbusiness bad debt deduction to George in the current year.
C)  The loans provide George with a business bad debt deduction.
D)  George may claim an ordinary loss as to the worthless loans.
E)  None of the above.F) C) and D)
G) A) and B)

Question 8

Similar to like-kind exchanges, the receipt of "boot" under § 351 can cause loss to be recognized.

Accepted Answer

A) True 
 B)False

Question 9

Adam transfers cash of $300,000 and land worth $200,000 to Camel Corporation for 100% of the stock in Camel. In the first year of operation, Camel has net taxable income of $70,000. If Camel distributes $50,000 to Adam:

Accepted Answer

A)  Adam has taxable income of $50,000.
B)  Camel Corporation has a tax deduction of $50,000.
C)  Adam has no taxable income from the distribution.
D)  Camel Corporation reduces its basis in the land to $150,000.
E)  None of the above.F) C) and D)
G) A) and E)

Question 10

Rob and Fran form Bluebird Corporation with the following investments.
​

Each receives 50% of Bluebird's stock. In addition, Fran receives cash of $40,000. One result of these transfers is that Fran has a:

Accepted Answer

A)  Recognized loss of $60,000.
B)  Recognized loss of $20,000.
C)  Basis of $460,000 in the Bluebird stock (assuming Bluebird reduces its basis in the land to $440,000) .
D)  Basis of $400,000 in the Bluebird stock (assuming Bluebird reduces its basis in the land to $440,000) .
E)  None of the above.F) A) and E)
G) C) and E)

Question 11

Eagle Corporation owns stock in Hawk Corporation and has taxable income of $100,000 for the year before considering the dividends received deduction. Hawk Corporation pays Eagle a dividend of $130,000, which was considered in calculating the $100,000. What amount of dividends received deduction may Eagle claim if it owns 15% of Hawk's stock?

Accepted Answer

A)  $0
B)  $70,000
C)  $91,000
D)  $104,000
E)  None of the aboveF) D) and E)
G) A) and E)

Question 12

How is the transfer of liabilities in a property transaction generally treated for tax purposes? How is a transfer of liabilities generally treated in a § 351 transaction? What exceptions could arise to this usual treatment in a § 351 setting?

Accepted Answer

Generally when another party assumes a l...

Question 13

Which of the following statements is incorrect regarding the dividends received deduction?

Accepted Answer

A)  A corporation must hold stock for more than 90 days in order to qualify for a deduction with respect to dividends on such stock.
B)  The taxable income limitation does not apply with respect to the 100% deduction available to members of an affiliated group.
C)  If a stock purchase is financed 75% by debt, the deduction for dividends on such stock is reduced by 75%.
D)  The taxable income limitation does not apply if the normal deduction (i.e., 70% or 80% of dividends)  results in a net operating loss for the corporation.
E)  None of the above.F) A) and B)
G) A) and C)

Question 14

The corporate marginal income tax rates range from 15% to 39%, while the individual marginal income tax rates range from 10% to 39.6%.

Accepted Answer

A) True 
 B)False

Question 15

Ira, a calendar year taxpayer, purchases as an investment stock in Redbird Corporation on November 3, 2015. On February 2, 2016, Redbird Corporation is declared bankrupt, and Ira's stock becomes worthless. Presuming § 1244 (stock in a small business corporation) does not apply, Ira has a short-term capital loss for 2016.

Accepted Answer

A) True 
 B)False

Question 16

Red Corporation, which owns stock in Blue Corporation, had net operating income of $200,000 for the year. Blue pays Red a dividend of $40,000. Red takes a dividends received deduction of $28,000. Which of the following statements is correct?

Accepted Answer

A)  Red owns 80% of Blue Corporation.
B)  Red owns 20% or more, but less than 80% of Blue Corporation.
C)  Red owns 80% or more of Blue Corporation.
D)  Red owns less than 20% of Blue Corporation.
E)  None of the above.F) C) and D)
G) B) and D)

Question 17

The transfer of an installment obligation in a transaction qualifying under § 351 is a disposition of the obligation that causes gain to be recognized by the transferor.

Accepted Answer

A) True 
 B)False

Question 18

In a § 351 transaction, if a transferor receives consideration other than stock, the transaction can be taxable.

Accepted Answer

A) True 
 B)False

Question 19

Double taxation of corporate income results because dividend distributions are included in a shareholder's gross income but are not deductible by the corporation.

Accepted Answer

A) True 
 B)False

Question 20

Gabriella and Maria form Luster Corporation with each receiving 50 shares of its stock. Gabriella transfers cash of $50,000, while Maria transfers a proprietary formula (basis of $0; fair market value of $50,000). Neither Gabriella nor Maria will recognize gain on the transfer.

Accepted Answer

A) True 
 B)False

Exam 12: Corporations: Organization, Capital Structure, and Operating Rules

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Correct Answer
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Red Corporation, which owns stock in Blue Corporation, had net operating income of $200,000 for the year. Blue pays Red a dividend of $40,000. Red takes a dividends received deduction of $28,000. Which of the following statements is correct?

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Correct Answer
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Adam transfers cash of $300,000 and land worth $200,000 to Camel Corporation for 100% of the stock in Camel. In the first year of operation, Camel has net taxable income of $70,000. If Camel distributes $50,000 to Adam:

Correct Answer
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How is the transfer of liabilities in a property transaction generally treated for tax purposes? How is a transfer of liabilities generally treated in a § 351 transaction? What exceptions could arise to this usual treatment in a § 351 setting?

Correct Answer
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Generally when another party assumes a l...
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George (an 80% shareholder) has made loans to Mountainview Corporation that become worthless in the current year. George is not employed by Mountainview.

Correct Answer
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Income that is included in net income per books but not included in taxable income is a subtraction item on Schedule M-1.

Correct Answer
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Which of the following statements is incorrect regarding the dividends received deduction?

Correct Answer
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Correct Answer
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Rob and Fran form Bluebird Corporation with the following investments. Each receives 50% of Bluebird's stock. In addition, Fran receives cash of $40,000. One result of these transfers is that Fran has a:

Correct Answer
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Wren Corporation (a minority shareholder in Lark Corporation) has made loans to Lark Corporation that become worthless in the current year.

Correct Answer
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Double taxation of corporate income results because dividend distributions are included in a shareholder's gross income but are not deductible by the corporation.

Correct Answer
verified

Gabriella and Maria form Luster Corporation with each receiving 50 shares of its stock. Gabriella transfers cash of $50,000, while Maria transfers a proprietary formula (basis of $0; fair market value of $50,000). Neither Gabriella nor Maria will recognize gain on the transfer.

Correct Answer
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The transfer of an installment obligation in a transaction qualifying under § 351 is a disposition of the obligation that causes gain to be recognized by the transferor.

Correct Answer
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Robin Corporation, a calendar year C corporation, had taxable income of $1.9 million, $1.2 million, and $900,000 for 2013, 2014, and 2015, respectively. Robin has taxable income of $1.5 million for 2016. The minimum 2016 estimated tax installment payments for Robin are:

Correct Answer
verified

For § 351 purposes, stock rights and stock warrants are included in the definition of "stock."

Correct Answer
verified

Similar to like-kind exchanges, the receipt of "boot" under § 351 can cause loss to be recognized.

Correct Answer
verified

In a § 351 transaction, if a transferor receives consideration other than stock, the transaction can be taxable.

Correct Answer
verified

The corporate marginal income tax rates range from 15% to 39%, while the individual marginal income tax rates range from 10% to 39.6%.

Correct Answer
verified

Exam 12: Corporations: Organization, Capital Structure, and Operating Rules

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Red Corporation, which owns stock in Blue Corporation, had net operating income of $200,000 for the year. Blue pays Red a dividend of $40,000. Red takes a dividends received deduction of $28,000. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Adam transfers cash of $300,000 and land worth $200,000 to Camel Corporation for 100% of the stock in Camel. In the first year of operation, Camel has net taxable income of $70,000. If Camel distributes $50,000 to Adam:

Correct AnswerverifiedShow Answer

How is the transfer of liabilities in a property transaction generally treated for tax purposes? How is a transfer of liabilities generally treated in a § 351 transaction? What exceptions could arise to this usual treatment in a § 351 setting?

Correct AnswerverifiedGenerally when another party assumes a l...View AnswerShow Answer

George (an 80% shareholder) has made loans to Mountainview Corporation that become worthless in the current year. George is not employed by Mountainview.

Correct AnswerverifiedShow Answer

Income that is included in net income per books but not included in taxable income is a subtraction item on Schedule M-1.

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Which of the following statements is incorrect regarding the dividends received deduction?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Rob and Fran form Bluebird Corporation with the following investments. ​ Each receives 50% of Bluebird's stock. In addition, Fran receives cash of $40,000. One result of these transfers is that Fran has a:

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Wren Corporation (a minority shareholder in Lark Corporation) has made loans to Lark Corporation that become worthless in the current year.

Correct AnswerverifiedShow Answer

Double taxation of corporate income results because dividend distributions are included in a shareholder's gross income but are not deductible by the corporation.

Correct AnswerverifiedShow Answer

Gabriella and Maria form Luster Corporation with each receiving 50 shares of its stock. Gabriella transfers cash of $50,000, while Maria transfers a proprietary formula (basis of $0; fair market value of $50,000). Neither Gabriella nor Maria will recognize gain on the transfer.

Correct AnswerverifiedShow Answer

The transfer of an installment obligation in a transaction qualifying under § 351 is a disposition of the obligation that causes gain to be recognized by the transferor.

Correct AnswerverifiedShow Answer

Robin Corporation, a calendar year C corporation, had taxable income of $1.9 million, $1.2 million, and $900,000 for 2013, 2014, and 2015, respectively. Robin has taxable income of $1.5 million for 2016. The minimum 2016 estimated tax installment payments for Robin are:

Correct AnswerverifiedShow Answer

For § 351 purposes, stock rights and stock warrants are included in the definition of "stock."

Correct AnswerverifiedShow Answer

Similar to like-kind exchanges, the receipt of "boot" under § 351 can cause loss to be recognized.

Correct AnswerverifiedShow Answer

In a § 351 transaction, if a transferor receives consideration other than stock, the transaction can be taxable.

Correct AnswerverifiedShow Answer

The corporate marginal income tax rates range from 15% to 39%, while the individual marginal income tax rates range from 10% to 39.6%.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Generally when another party assumes a l...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Rob and Fran form Bluebird Corporation with the following investments. Each receives 50% of Bluebird's stock. In addition, Fran receives cash of $40,000. One result of these transfers is that Fran has a:

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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