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Exam 9: Corporations: Organization, capital Structure, and Operating Rules

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Question 51

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No dividends received deduction is allowed unless the corporation has held the stock for more than 90 days.

A) True
B) False

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Question 52

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Nancy,Guy,and Rod form Goldfinch Corporation with the following consideration. Goldfinch issues its 500 shares of stock as follows: 250 to Nancy,200 to Guy,and 50 to Rod.In addition,Guy gets $50,000 in cash.

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Question 53

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Albert transfers land (basis of $140,000 and fair market value of $320,000) to Gold Corporation for 80% of its stock and a note payable in the amount of $80,000.Gold assumes Albert's mortgage on the land of $200,000.

Carol and Candace are equal partners in Peach Partnership.In the current year,Peach had a net profit of $75,000 ($250,000 gross income - $175,000 operating expenses)and distributed $25,000 to each partner.Peach must pay tax on $75,000 of income.

Almond Corporation,a calendar year C corporation,had taxable income of $900,000,$1.1 million,and $1.2 million for 2010,2011,and 2012,respectively.Almond's taxable income is $2 million for 2013.Compute the minimum estimated tax payments for 2013 for Almond Corporation.

Hornbill Corporation,a cash basis and calendar year C corporation,was formed and began operations on May 1,2013.Hornbill incurred the following expenses during its first year of operations (May 1 - December 31,2013): temporary directors meeting expenses of $10,500,state of incorporation fee of $5,000,stock certificate printing expenses of $1,200,and legal fees for drafting corporate charter and bylaws of $7,500.Hornbill Corporation's current year deduction for organizational expenditures is $5,800.

Kim,a real estate dealer,and others form Eagle Corporation under § 351.Kim contributes inventory (land held for resale)in return for Eagle stock.The holding period for the stock includes the holding period of the inventory.

During the current year,Maroon Company had $125,000 net profit from operations.Belinda,the sole owner of Maroon,is in the 33% marginal tax bracket.Determine the combined tax burden for Maroon and Belinda under the following independent situations.(Ignore any employment taxes.) a. MaroonCompany is a C corporation and all of its after-tax income is distributed to Belinda. b. MaroonCompany is a propietorship and all of its after-tax income is withdrawn by Belinda c. MaroonCompany is anS corporation and all of its after-tax income is distributed to Belinda

Lucinda is a 60% shareholder in Rhea Corporation,a calendar year S corporation.During the year,Rhea Corporation had gross income of $550,000 and operating expenses of $380,000.In addition,the corporation sold land that had been held for investment purposes for a short-term capital gain of $30,000.During the year,Rhea Corporation distributed $50,000 to Lucinda.With respect to this information,which of the following statements is correct?

In a § 351 transfer,a shareholder receives boot of $10,000 but ends up with a realized loss of $3,000.Only $7,000 of the boot will be taxed to the shareholder.

A calendar year C corporation can receive an automatic 9-month extension to file its corporate return (Form 1120)by timely filing a Form 7004 for the tax year.

Income that is included in net income per books but not included in taxable income is a subtraction item on Schedule M-1.

On December 31,2013,Flamingo,Inc.,a calendar year,accrual method C corporation,accrues a bonus of $50,000 to its president (a cash basis taxpayer),who owns 75% of the corporation's outstanding stock.The $50,000 bonus is paid to the president on February 1,2014.For Flamingo's 2013 Form 1120,the $50,000 bonus will be a subtraction item on Schedule M-1.

What is the rationale underlying the tax deferral treatment available under § 351?

Which of the following statements is incorrect regarding the dividends received deduction?

Ed,an individual,incorporates two separate businesses that he owns by establishing two new C corporations.Each corporation generates taxable income of $50,000.Each corporation will have a tax liability of $11,125.

The receipt of nonqualified preferred stock in exchange for the transfer of appreciated property to a controlled corporation results in recognition of gain to the transferor.

Schedule M-2 is used to reconcile unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at the end of the year.

Schedule M-1 of Form 1120 is used to reconcile financial net income with taxable income reported on the corporation's income tax return as follows: net income per books + additions - subtractions = taxable income.Which of the following items is a subtraction on Schedule M-1?

In general,the basis of property to a corporation in a transfer that qualifies as a nontaxable exchange under § 351 is the basis in the hands of the transferor shareholder decreased by the amount of any gain recognized on the transfer.