Regulation 3 PassMaster Questions - Maxixishere Pdf...

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Becker CPA Review, PassMaster Questions Lecture: Regulation 3 1 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. CPA PassMaster Questions–Regulation 3 Export Date: 10/30/08 Maxixishere Pdf Collection
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Becker CPA Review, PassMaster Questions Lecture: Regulation 3 2 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. C Corporations, Depreciation, and MACRS CPA-01659 Type1 M/C A-D Corr Ans: B PM#1 R 3-01 1. CPA-01659 ARE Nov 95 #3 Page 19 A C corporation's net capital losses are: a. Carried forward indefinitely until fully utilized. b. Carried back 3 years and forward 5 years. c. Deductible in full from the corporation's ordinary income. d. Deductible from the corporation's ordinary income only to the extent of $3,000. CPA-01659 Explanation Choice "b" is correct. A C corporation's net capital losses are carried back 3 years and forward 5 years; they expire after 5 years. In addition, a C corporation cannot deduct net capital losses from ordinary income. Choice "a" is incorrect. A C corporation's net capital losses cannot be carried forward indefinitely. They expire after 5 years. Choices "c" and "d" are incorrect. A C corporation cannot deduct net capital losses from ordinary income. CPA-01665 Type1 M/C A-D Corr Ans: D PM#2 R 3-01 2. CPA-01665 ARE Nov 95 #7 Page 19 Baker Corp., a calendar year C corporation, realized taxable income of $36,000 from its regular business operations for calendar year 1994. In addition, Baker had the following capital gains and losses during 1994: Short-term capital gain $8,500 Short-term capital loss (4,000) Long-term capital gain 1,500 Long-term capital loss (3,500) Baker did not realize any other capital gains or losses since it began operations. What is Baker's total taxable income for 1994? a. $46,000 b. $42,000 c. $40,500 d. $38,500 CPA-01665 Explanation Choice "d" is correct. Capital losses offset capital gains. If a corporation has net capital gains, they are taxed at ordinary (corporate) income tax rates. Taxable income from business operations $36,000 Short-term capital gain $8,500 Short-term capital loss (4,000 ) $4,500 Long-term capital gain 1,500 Long-term capital loss (3,500 ) (2,000 ) Net capital gain 2,500 Taxable income $38,500 CPA-01807 Type1 M/C A-D Corr Ans: B PM#3 R 3-01 3. CPA-01807 ARE R03 #5 Page 34 At the beginning of the year, Westwind, a C corporation, had a deficit of $45,000 in accumulated earnings and profits. For the current year, Westwind reported earnings and profits of $15,000. Westwind Maxixishere Pdf Collection
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