Midterm Answers - Summer Midterm Answers 1. False. It is...

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1. False. It is taxed as a corporation if it clearly resembles one. 2. True. 3. False. Options are not stock under Code Sec. 351. 4. False. Gain on sale is capital gain. Within limits, losses are ordinary losses. 5. False. The limit is 10 percent, not 50 percent. 6. False. The first $5,000 is expensed (assuming no phaseout) and the remainder is amortized over 180 months. 7. False. A parent-subsidiary controlled group may fi le a consolidated return. 8. d. Liabilities in excess of basis ($70,000 - $50,000) are recognized, $8,000 of which is Code Sec. 1231 gain, $12,000 is Code Sec. 1250 gain. 9. b. Even though the building mortgage exceeds the building’s basis, it is short of aggregate basis transferred (including cash). 10. a. $104,000 is 80 percent of taxable income prior to the deduction, i.e., $210,000 + $150,000 - $230,000, or $130,000. (80 percent of $150,000, or $120,000, would not create an NOL.) 11. d. 10 percent of taxable income of $50,000 + $8,000. 12. a. 15 percent of $30,000. 13. b. Kevin owns greater than 50 percent of Dana Corporation. Since the depreciated building also is depreciable property in Dana’s hands, Code Sec. 1239 applies. Thus, the entire gain of $56,000 is ordinary income. 14. b. A $56,000 net operating loss is determined as follows: Income ($230,000 + $120,000) $350,000 Expenses (310,000) Dividends-received deduction (96,000) Taxable income (NOL) $(56,000) The full dividends-received deduction is permitted because it creates an NOL. 15. b. Future’s taxable income of $143,170 is determined as follows:
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This note was uploaded on 11/24/2010 for the course TXX 5762 taught by Professor Allen during the Fall '10 term at Nova Southeastern University.

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Midterm Answers - Summer Midterm Answers 1. False. It is...

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