FTax IRGTB ch19 p001-018

Also organizational costs are generally clearly

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Unformatted text preview: (See Example 7, pp. 19-10 and 19-11, and 248.) 5. False. In computing a corporation's net operating loss for any given year, the dividends-received deduction is not limited to taxable income. Thus, the dividends-received deduction can create or increase a corporation's net operating loss for any given year. [See p. 19-9 and 246(b)(2).] 6. True. The annual limitation is 10 percent of taxable income determined without reduction for charitable contributions, the dividends-received deduction, net operating loss carrybacks, and capital loss carrybacks. [See Example 13, p. 19-14 and 170(b)(2).] 7. False. Corporations can use capital losses only to offset capital gains, while individuals can use the capital losses to offset up to $3,000 of ordinary income. In addition, the carryover for a corporation is three years back and five years forward compared with an indefinite carryforward of an individual. [See Example 14, pp. 19-15 and 19-16, and 1211(a).] 8. False. Section 291 reclassifies some of the 1231 gain as ordinary income on the sale of 1250 property. (See Example 15, pp. 19-16 and 19-17, and 291.) 9. True. The deduction is postponed until the year the income is reported by the shareholder. [See p. 19-17 and 267(a)(2).] 19-11 19-12 Chapter 19 Corporations: Formation and Operation 10. 11. 12. False. The highest marginal corporate rate 35 percent, which is the same as the highest individual rate of 35 percent for 2011. (See p. 19-18.) False. The alternative minimum tax rate for corporations is 20 percent, whereas the rate for individuals is 26 and 28 percent. [See p. 19-20 and 55(b)(1).] False. A corporation is subject to the AMT only to the extent it exceeds the corporation's regular tax. More importantly, since a corporation is entitled to a $40,000 exemption, this corporation would not be subject to the AMT. (See p. 19-20.) False. The calendar-year corporate return would be due March 15. (See p. 19-22.) False. The transferor must also receive at least 80 percent of each class of non-voting stock. [See p. 19-30, 368(c), and Rev. Rul. 59-259 in footnote 80.] False. The receipt of debt instruments results in a recognized gain under 351. (See pp. 19-30 and 19-31.) True. The transfers do not have to be simultaneous as long as they are part of the same transaction, and control is gained during the transaction. (See p. 19-29 and Reg. 1.351-1.) False. The assumption of debt will result in the recognition of gain if the transfer was for tax avoidance or in excess of basis. (See pp. 19-31 and 19-32.) True. Section 1032 provides that no gain or loss will be recognized when a corporation issues its own stock in exchange for money or other property. (See p. 19-33.) False. The transferor's basis is increased by any gain recognized. The transferee corporation's basis equals the transferor's basis plus any gain recognized by the transferor on the transfer. In certain cases, loss is equal to fair market value. (See p. 19-34.) True. Section 118 shields the corporation from recogniz...
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This note was uploaded on 02/05/2012 for the course ACCT 112 taught by Professor Smith during the Spring '11 term at Adrian College.

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