Kell had no portfolio indebtedness in its 1988 income

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Unformatted text preview: the year in which the property is disposed of. Choices "b", "c", and "d" are incorrect, per the above explanation. CPA-02198 Type1 M/C 98. CPA-02198 Nov 89 II #42 A-D Corr Ans: D PM#4 R 3-99 Page 21 Kell Corp. Income statement for the year ended December 31, 1988: Sales Cost of sales Gross margin Operating expenses Operating income Other income: Gain on sale of investments Life insurance policy proceeds Dividends Total Other expense: Contributions Income before income tax $900,000 600,000 300,000 250,000 50,000 $15,000 10,000 3,000 78,000 28,000 8,000 $70,000 The life insurance policy proceeds represent a lump sum payment in full as a result of the death of Kell's controller. Kell was the owner and beneficiary of this policy. In its 1988 income tax return, Kell should report taxable life insurance proceeds of: a. b. c. d. $10,000 $8,000 $5,000 $0 CPA-02198 Explanation Choice "d" is correct. $0. Rule: Proceeds from insurance on the death of an officer where the corporation is the beneficiary are not includible in the taxable income of a corporation. Choices "a", "b", and "c" are incorrect, per the above explanation. CPA-02202 Type1 M/C A-D Corr Ans: C PM#5 R 3-99 48 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. Maxixishere Pdf Collection Becker CPA Review, PassMaster Questio...
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