C10-Chp-00-Tst-3-Exm-Sol-Night Test no. 3-March 3-2010

C10-Chp-00-Tst-3-Exm-Sol-Night Test no. 3-March 3-2010 - 8...

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8. Consolidations 01ab6a52494629374803cb77e2b045fdc8bf9d28.xls Page 1 of 3 No Ans 1 C 2 b Section 1211 says that (for corporations) losses from sales of capital assets are allowed only to the extent of gains from sales of capital assets. Section 1231 covers the sale of business property that is not a capital asset. Section 1231 says that if Section 1231 gains exceed Section 1231 lossses, then the gains are treated as capital gains and the losses are treated as capital losses Section 1231 says that if Section 1231 gains DO NOT exceed Section 1231 lossses, then such sales are NOT treated as sales of capital assets. What we have here is capital gains of $50,000 with no offsetting capital losses. We have ordinary losses of $80,000, which are not subject to the capital loss limit. Year - 2010 Parent Local Corp. Consolidated Gross income from operations 300,000 200,000 500,000 Interest income 17,000 17,000 MACRS depreciation (22,000) (5,000) (27,000) Other deductible operating expenses (200,000) (203,000) (403,000) Separate taxable income 95,000 (8,000) 87,000 Capital gain 50,000 50,000 Section 1231 loss (80,000) (80,000) Consolidated taxable income 57,000 3 C 4 D Alternate Computation Layers $50,000 0.15 $7,500 25,000 0.25 $6,250 25,000 0.34 $8,500 $22,250 100,000 0.39 $39,000 2 $200,000 $61,250 $44,500 5 B 6 C Debit Credit Investment in Hickory Corp. common stock 120,000 Equity in earnings of subsidiary 120,000 Cash 48,000 Investment in Hickory Corp. common stock 48,000 Difference 72,000 Tax Rate 40% Deferred tax liability $28,800 7 C Amount paid for stock $2,000,000 Long-term tax-exempt federal rate 5% Limit on write-off $100,000 Taxable income before NOL $600,000 Taxable income after NOL $500,000 The remainder of the $1,000,000 NOL is carried forward
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9. Ptshp 01ab6a52494629374803cb77e2b045fdc8bf9d28.xls Page 2 of 3 No AnsLine 8 D Compare rules for investing assets in an entity: corporation vs. partnership
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This note was uploaded on 03/09/2012 for the course ACCT 6120 taught by Professor Godfrey,h during the Spring '08 term at UNC Charlotte.

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C10-Chp-00-Tst-3-Exm-Sol-Night Test no. 3-March 3-2010 - 8...

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