Acct424_Week 1and2 - Week 1 Quiz Grade Details 1.

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Week 1 Quiz Grade Details 1. Question: (TCO 2) Norm is the sole shareholder of Elk, Inc., a C corporation.  Maxine is the sole  shareholder of Moose, Inc., an S corporation.  Both businesses were started in 2008, and each  business sustained a $10,000 capital loss for the year.  Which of the following statements is  correct? Your Answer: Norm can offset the $10,000 loss against his capital gains for the year. If he has no capital gains, he may deduct a $3,000 capital loss in 2008. Elk, Inc., can carry the capital loss forward for up to five years. CORRECT Moose, Inc., can carry the capital loss forward for up to five years. Maxine can offset the $10,000 loss against her capital gains for the year. If she has no capital gains, she may deduct a $10,000 capital loss in 2008. None of the above Instructor Explanation: A C corporation cannot deduct a capital loss in the year incurred but is allowed to carry such loss  back 3 years and forward 5 years.  Elk, Inc., was started in 2008, so there is no carryback period.   Therefore, the loss may be carried forward five years.  Individuals cannot carry capital losses  back.  If Maxine has any capital gains, she can offset the capital loss against other capital gains.   If she has a net capital loss after offsetting the capital loss against capital gains, she may deduct  $3,000 of the loss in 2008.   Points Received:
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2. Question: (TCO 2) Red Corporation, which owns stock in Blue Corporation, had net operating income of  $500,000 for the year.  Blue pays Red a dividend of $50,000.  Red takes a dividends received  deduction of $35,000.  Which of the following statements is correct? Your Answer: Instructor Explanation: Red’s dividends received deduction is 70% of the dividend received ($35,000 ÷ $50,000).  The  70% dividends received deduction applies if ownership is less than 20%.   Points Received: 2 of 2 3. Question: (TCO 2) Orange Corporation owns stock in White Corporation and has net operating income of  $800,000 for the year.  White Corporation pays Orange a dividend of $300,000.  What amount of  dividends received deduction may Orange claim if it owns 18% of White stock (assuming  Orange’s dividends received deduction is not limited by its taxable income)? Your Answer: Instructor Explanation: The dividends received deduction depends upon the percentage of ownership by the corporate  shareholder.  If Orange Corporation owns 18% of White Corporation, Orange would qualify for a  70% deduction, or $210,000 in this case.   Points Received: 2 of 2 4. Question:
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Acct424_Week 1and2 - Week 1 Quiz Grade Details 1.

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