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Exam 13: Corporate Formations and Operations

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Question 41

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The dividends received deduction is designed to mitigate the extent to which corporate earnings are subject to more than two levels of taxation.

A) True
B) False

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Question 42

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Boston, Inc., made a capital contribution of investment property to its 100 percent owned subsidiary, Hartford Company.The investment property had a fair market value of $1,000,000 and a tax basis to Boston of $250,000.What are the tax consequences to Boston, Inc., on the contribution of the investment property to Hartford Company and what is the tax basis of the investment property to Hartford Company after the contribution to capital?

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No gain is recognized by Boston, Inc.The...

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Question 43

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On December 31, 2018, Khors Company issued nonqualified stock options to its CEO.The options fully vest on December 31, 2019, and the options were valued at $50,000 on the grant date.Ms.Svaro exercised the options on December 31, 2019.The total bargain element at the time of exercise was $40,000.For 2019, what is the nature of the book-tax difference due to the options exercised?

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction.The assumed liability will, as a general rule, be treated as boot received by Jane.

A corporation may carry a net capital loss back two years and forward 20 years.

Which of the following statements is false regarding consolidated tax returns?

For a corporation, purchased goodwill generally leads to temporary book-tax differences.

Amy transfers property with a tax basis of $900 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $450 in a transaction that qualifies for deferral under section 351.The corporation assumed a liability of $150 on the property transferred.What is Amy's tax basis in the stock received in the exchange?

Jazz Corporation owns 10 percent of Williams Corp.'s stock.Williams distributed a $10,000 dividend to Jazz Corporation.Jazz Corp.'s taxable income (loss) before the dividend was ($2,000) .What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Which of the following is deductible in calculating DRD modified taxable income?

During 2019, Hughes Corporation sold a portfolio of stock it had held for five years at a loss of $200,000.It also sold some investment land and recognized a capital gain of $180,000.In 2017, Hughes reported a net capital gain of $12,000 and in 2016 it recognized a net capital gain of $6,000.What is the amount of its net capital loss carryover to 2020?

Which of the following statements best describes the impact of receiving boot in a section 351 transaction?

Which of the following is not an acceptable method of determining the required annual payment of federal income tax for corporations?

Which of the following regarding Schedule M-1 and Schedule M-3 of Form 1120 is false?

Which of the following is not included in the corporate income tax formula?

By default, an affiliated group must file a consolidated tax return.

In the current year, Auto Rent Corporation reported the following taxable income at the end of its first, second, and third quarters: $\begin{array}{c}\begin{array}{lll}\\\text {Quarter}\\\text {First}\\\text {Second}\\\text {Third}\end{array}\begin{array}{c}\text {Cumulative Taxable}\\\text {Income}\\\$ 1,500,000 \\ \$ 2,800,000 \\ \$ 3,600,000 \end{array}\end{array}$ What amount of estimated tax payments would Auto Rent pay each quarter in order to avoid estimated tax penalties under the annualized income method of computing estimated tax payments?

Control as it relates to a section 351 transaction is strictly defined to be 80 percent or more of the voting power of the stock of the corporation to which property is transferred.

Accrual-method calendar-year corporations are not allowed to deduct charitable contributions unless they actually make payment to the charity by year-end.

Rachelle transfers property with a tax basis of $800 and a fair market value of $900 to a corporation in exchange for stock with a fair market value of $750 and $50 cash in a transaction that qualifies for deferral under section 351.The corporation assumed a liability of $100 on the property transferred.What is Rachelle's tax basis in the stock received in the exchange?