(TCO 2) Barry owns a 30% interest in a partnership that earned $300,000 this year. He also owns 30% of
the stock in a C corporation that earned $300,000 during the year. The partnership did not make any
distributions and the corporation did not pay any dividends. How much income must Barry report from
$0 income from the partnership and $0 income from the corporation.
$0 income from the partnership and $90,000 income from the corporation.
$90,000 income from the partnership and $0 income from the
$90,000 income from the partnership and $90,000 income from the
None of the above.
Barry must report his $90,000 share of the partnership’s income on his individual tax return. He will not
report any income from the corporation because no dividends were paid during the year.
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(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?
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.
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
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.
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(TCO 2) Grocer Services Corporation (a calendar year taxpayer), a wholesale distributor of food, made
the following donations to qualified charitable organizations during the year: