Midterm Answers - 1. A business cannot be taxed as a...

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1. A business cannot be taxed as a corporation unless it is incorporated under local law. True/False 2. When a corporation receives property from a shareholder its basis equals that of the shareholder, increased by any gain recognized by the shareholder. True/False 3. Options to buy stock constitute stock for Code Sec. 351 purposes, but only if the stock so qualifies. True/False 4. A sale of Code Sec. 1244 stock results in ordinary income if sold at a gain. True/False 5. A corporation’s deduction for charitable contributions is limited to 50 percent of adjusted taxable income. True/ False 6. Organizational expenditures must be capitalized but may be amortized over 60 months or longer. True/False 7. A brother-sister controlled group can file a consolidated return if all members of the group consent. True/ False 8. Sandra Sherman incorporates her apartment building. It has a basis of $50,000, a value of $150,000, is subject to a mortgage of $70,000 and has a depreciation recapture potential of $12,000. If Sandra receives stock worth $80,000, she will recognize: a. No gain. b . $30,000 of gain, $12,000 of which is ordinary. c. $12,000 of ordinary income. d. $20,000 of gain, $12,000 of which is ordinary. 9. Algernon Amsley transferred the following to his controlled corporation in exchange for stock: Basis Value Building $20,000 $50,000 Cash 10,000 10,000 Mortgage on building 40,000 40,000 IBM stock 15,000 12,000 Algernon must recognize a gain of: a. $20,000 b. $0
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c. $10,000 d. $27,000 10. One year Potter, Inc. had gross income from sales of $210,000, business expenses of $230,000, and dividend income from U.S. corporations of $150,000. Potter’s 80 percent dividends-received deduction was: a. $104,000 b. $120,000 c. $0 d. $150,000 11. Prior to a charitable gift to the Plato University of land with a basis of $6,000 and a value of $13,000, All-Set, Inc. had taxable income of $50,000. If the dividends-received deduction was $80,000, the charitable contribution deduction is: a. $5,000 b. $6,000 c. $2,925 d. $5,800 12. Black & White, Inc. has $20,000 in taxable income, plus a long-term capital gain of $10,000. Its tax liability is: a. $4,500 b. $10,200 c. $5,800 d. $7,500 13. Kevin Broid owns all the stock of Dana Corporation. During the year, Kevin sold a building to Dana for $150,000. The building cost $120,000, its adjusted basis was $94,000, and it was depreciated under the straight-line method. Dana intends to use the building in its operations. Kevin’s tax consequences of the sale are: a. $56,000 dividend income b . $56,000 ordinary income c. $56,000 Code Sec. 1231 gain d. $26,000 ordinary income and $30,000 Code Sec. 1231 gain e. $56,000 long-term capital gain 14. Hoover, Inc. had gross receipts from operations of $230,000, operating and other expenses of $310,000, and dividends received from a 45 percent-owned domestic corporation of $120,000. Hoover’s tax position for the year is: a. $8,000 taxable income b. $56,000 net operating loss c. $40,000 taxable income
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This note was uploaded on 11/14/2010 for the course TXX 5762 taught by Professor Allen during the Fall '10 term at Nova Southeastern University.

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Midterm Answers - 1. A business cannot be taxed as a...

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