Becker CPA Review, PassMaster Questions
Lecture: Regulation 3
1
© 2009 DeVry/Becker Educational Development Corp. All rights reserved.
CPA PassMaster Questions–Regulation 3
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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
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