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business
federal taxation 2019

Questions and Answers of Federal Taxation 2019

Richard sold a rare automobile he had held as an investment in 2017. Richard purchased the automobile in 1992; its adjusted basis at the time of the sale was \(\$ 70,000\), and the selling price was
John sold a painting in February 2018 for \(\$ 40,000\). He received \(\$ 10,000\) in February and was to receive \(\$ 15,000\) in 2019 and 2020 , plus interest. He purchased the painting in 2007 for
John's basis in the painting in problem 67 is:a. \(\$ 0\)b. \(\$ 25,000\)c. \(\$ 30,000\)d. \(\$ 39,000\)e. \(\$ 42,250\)problem 67John sold a painting in February 2018 for \(\$ 40,000\). He received
Do any of the transactions below qualify for installment reporting? If not, why not?a. Sale of property in December, with payment received in full the following January at a gainb. Sale of property
A manufacturer of pollution control facilities reported its profits on the completed-contract method. To value its raw materials and work in process, the taxpayer used the LIFO method, thus "having
Mara transferred assets to Con Co. on May 15, 2018. Mara acquired the assets on June 15,2015 . What is Con Co.'s holding period for the assets?
James, who is single, owns Iper Company stock that became worthless this year. If the stock is Code Sec. 1244 stock then what type of loss does James have for tax purposes?
What is the "built-in loss" rule of Code Sec. 1244 ? What is the purpose of the rule?
Rhia Co. began operations in 2018. Are there restrictions on the tax year it may use?
When is the cash method of accounting not available to corporations?
Are net capital gains and losses treated similarly for individuals and corporations?
What is the special depreciation recapture rule that applies to corporations?
What is the purpose of the dividends-received deduction? What corporations are entitled to claim this deduction? What dividends qualify for this deduction?
Under what circumstances is the dividendsreceived deduction on a given dividend received not available?
Just Corporation owns 11 percent of Shap Co.'s stock. What is the divdends-received deduction it will use?
What restrictions apply to the dividendsreceived deduction of dividends received from debt-financed stock purchases?
What happens to the basis of stock on which an "extraordinary" dividend has been received?
What are the main differences between net operating losses of individuals and corporations?
Milroy Inc. had a \(\$ 250,000\) net operating loss (NOL) this year. In which years can Milroy Inc. use this NOL?
In the absence of Code Sec. 248 , how would organizational expenditures be treated?
What is the amortization period for organizational expenditures?
How do corporations treat start-up expenditures?
What is the maximum charitable contribution allowance for corporations? Is there a carryover to other years?
What is the corporate contribution base for charitable deductions?
When is the full fair market value deduction not available on a transfer of property to charity?
Describe the disallowed deductions and losses of corporations.
When may it be a tax advantage to incorporate even though the income may be double taxed?
Frumer Inc. is the parent corporation of a parent-subsidiary controlled group. The subsidiaries were acquired this year. It is considering filing a consolidated tax return. What are the advantages
Are all affiliated corporations eligible to file consolidated returns?
What is a built-in deduction on a consolidated return?
Parent Corporation owns all the stock in Subsidiary Corporation and is on the calendar-year tax year. Subsidiary Corporation has a fiscal year ending on August 31. Are they allowed to file a
Must corporations make estimated tax payments? If so, when?
What are the four general categories of Schedule M-1 adjustments needed to reconcile book income and taxable income?
What is the purpose of the reconciliation of taxable income with book income?
What is the purpose of Schedule UTP?
Sevish Co.'s taxable income is greater than its book income. What is the result of this situation?
Bob, Sam, and Tom formed IU Inc. in 2018. Bob contributed equipment (Code Sec. 1231 property) he acquired in 2015 for \(\$ 190,000\). On the date of transfer, the equipment's adjusted basis and fair
Olivia and Tatiana form Jen Co. in 2018. Olivia contributed services worth \(\$ 24,000\) and property worth \(\$ 1,000\) and Tatiana contributed property worth \(\$ 25,000\). Each received 25 shares
Assume the same facts in 55 except Olivia received 40 shares and the fair market value of the property she contributed was \(\$ 16,000\). Is the transaction nontaxable under Code Sec. 351?
In 2018, Thomas transferred land he bought in 2009 worth \(\$ 100,000\) to Andy Co. in return for 50 shares of stock. The land has an adjusted basis of \(\$ 30,000\) and is subject to a \(\$ 50,000\)
Yager and Boggs formed Y\&B Company in 2018. Yager contributed a building with a fair market value of \(\$ 97,000\), a mortgage of \(\$ 75,000\) and an adjusted basis of \(\$ 50,000\) in return for
Bill decided to incorporate his printing business and to give his manager, Charlie, a share in the business. Bill's sole proprietorship transferred the following to Tom Co.:Bill received 70 shares of
Susan Sweets is a 40 percent shareholder in Acclaim Inc., a theatrical supplies company. She transfers a fully depreciated car with a value of \(\$ 12,000\) to the corporation, but does not receive
The municipality of Viewpoint, Kansas, wishes to attract local businesses. As part of a development program, it donated a building with a basis of \(\$ 50,000\) and a value of \(\$ 200,000\) plus
In each of the following situations, determine if there is any depreciation or general business credit recapture.a. Joe incorporates his sole proprietorship and subsequently gifts the stock to his
Gary and Tom own 100 shares of Rosa Co. stock. Gary acquired the stock for \(\$ 60,000\) from Rosa Co. three years ago when it was formed. Tom acquired the stock two years ago from Julie for \(\$ \$
In 2016, Susan Christian transferred a machine with a fair market value of \(\$ 30,000\) and an adjusted basis of \(\$ 40,000\) to JPC Corporation in return for 60 shares of stock. The stock
Niffy Corporation, a domestic C corporation, issued 100 shares of Code Sec. 1202 stock on November 1, 2013, to Jennifer. This was the first time it issued such stock. Jennifer sold the shares on
A corporation has income of \(\$ 80,000\) from operations, a \(\$ 12,000\) short-term capital gain, and a \(\$ 16,000\) long-term capital loss. What is the corporation's taxable income for the year?
Baginski Corporation purchased a residential building and depreciated it using straightline depreciation. Determine the amount of ordinary income and Code Sec. 1231 income to be recognized assuming:
Cablephones Inc., which is not a member of an affiliated group, had gross income from operations of \(\$ 390,000\) and deductible expenses of \(\$ 475,000\). Dividends of \(\$ 300,000\) were received
What is the dividends-received deduction allowed a corporation that receives \(\$ 170,000\) in dividends from a 45 percent owned domestic corporation if 37 percent of the cost of the investment is
McIntyre Corporation purchases 1,000 shares of a 10 percent owned domestic corporation at \(\$ 100\) per share. McIntyre receives a \(\$ 25\) per share dividend within the first year after the
Bevin Inc. had the following in 2018 :a. What is Bevin Inc.'s taxable income in 2018?b. What carrybacks or carryovers does it have from 2018? Gross income from operation Dividends from 22%-owned
Susco had the following items this year:What is Susco's taxable income and does it have any carrybacks/carryovers? Gross receipts Operating expenses Long-term capital gain Long-term capital loss
In problem 66 above, what would be Susco's taxable income if the long-term capital gain were \(\$ 70,000\) (instead of \(\$ 40,000\) )?problem 66Susco had the following items this year:What is
Caskets Inc. was incorporated on June 1, but did not start business until September 1. It adopted a fiscal year ending March 31 , coinciding with the end of its natural business cycle. In connection
Ludlow Corporation has excess inventory that it no longer wants. In order to clear out its warehouse to make room for shipments of new inventory, it has decided to donate the inventory (bedding
Donor Corporation had the following income and deductions for last year:Donor Corporation also made contributions (not included above) to qualifying charitable organizations of \(\$ 175,000\).
Barbara sells an asset to her wholly-owned corporation. The asset has a basis of \(\$ 32,000\) and a fair market value at the time of the sale of \(\$ 27,000\). What is the corporation's recognized
On April 4, 2018, Mexco sold stock it held as an investment. It had a \(\$ 300,000\) shortterm capital loss on the sale. It also sold a building, equipment, and the land under the building on July 1,
Red Paint Corporation generated \(\$ 100,000\) of taxable income from operations last year, plus a \(\$ 70,000\) gain from the sale of land used as a parking lot for six years. What is the amount of
A \& G Drug Store Inc. has been in operation for six years. The first four years it accumulated operating loss carryovers of \(\$ 65,000\). The fifth year it earned \(\$ 25,000\) in operating income
The matrix below shows the stock ownership in four corporations by four unrelated individuals:Which of the above corporations, if any, are members of a brother-sister controlled group? Explain why
Tiller Corporation's net income per books (after taxes) was \(\$ 68,450\). During the year, it had the following transactions:Determine Tiller Corporation's taxable income assuming it does not have
Crates Corporation's financial income before income taxes for the year was \(\$ 250,000\).Organization costs of \(\$ 90,000\) are being written off over a 10-year period for financial statement
Cybele formed a corporation and transferred a building with a basis of \(\$ 50,000\), subject to a \(\$ 70,000\) mortgage, and cash of \(\$ 15,000\) to it for stock. Cybele's basis in her stock and
The following statements about the dividendsreceived deduction are true, except:a. The stock on which dividends are received must be held for at least 46 days.b. The deduction is not available if the
Excluding extensions, which one of the following Form 1120 tax returns is filed late? a. b. c d. Tax Year Ended January 31, 2018 August 31, 2017 July 31, 2017 December 31, 2018 Date Filed May 15,
During 2018, Jones transferred \(\$ 15,000\) cash and a building with an adjusted basis of \(\$ 50,000\) and a fair market value of \(\$ 90,000\) to Malibu Gardens Corporation in return for 90
In 2018 , Sally transferred a building with an adjusted basis of \(\$ 40,000\) and a fair market value of \(\$ 45,000\) to Sandy Corporation. In exchange, she received the following: 1. 80 percent of
Indo Corporation was organized on January 4 2018, and began active business on January 5 , 2018. Indo incurred the following expenses in connection with creating its business.What is the maximum
Sinco Company had \(\$ 300,000\) of income from business operations and \(\$ 700,000\) of allowable expenses. It also received \(\$ 20,000\) in dividends from a domestic corporation in which it owns
Jones is a sole proprietorship. He would like to be taxed as a corporation for federal tax purposes. Jones may become a corporation by:a. Filing a corporate return for this yearb. Timely filing Form
\(\mathrm{XYZ}\) is a corporation. It needs to raise some capital and is uncertain whether to issue debt or equity. Which of the following statements is true?a. Both interest payments and dividend
In the year of formation, a corporation:a. May elect a tax period other than those of its major shareholdersb. Must elect the same tax period as its major shareholdersc. Must use the cash basis for
Smith Co. sells a machine during the year for \(\$ 100,000\). Smith acquired the machine for \(\$ 140,000\). At the time of sale, the machine's adjusted basis was \(\$ 47,200\). Smith Co.'s
Bevco incurred start-up expenditures while investigating the acquisition of a business. With respect to such expenditures, Bevco:a. Can expense them in the year incurredb. Must capitalize them and
Which of the following corporate groups may file a consolidated tax return?a. Brother-sister groupb. Parent-subsidiary groupc. Both brother-sister and parent-subsidiary groupsd. None of the above
Shock Inc. has several uncertain tax positions this year. It should do which of the following:a. Determine if the probability of the position being sustained upon IRS challenge is greater than \(50
A, B and V Corporations each have only one class of stock outstanding. The ownership of the stock is as follows:Are any of the corporations part of a brothersiser controlled group for Code Sec. 1561
Tatco's pretax book income and taxable income differ because of one item, warranty expense. Tatco reports a \(\$ 200,000\) warranty expense and a related estimated liability for warranties for
Last year, Intrepid Corporation's tax return revealed the following items:a. What is Intrepid's dividends-received deduction?b. What is the charitable contribution deduction?c. What is the taxable
Mr. Trent transferred three apartment buildings to a new corporation in exchange for all its stock. The facts pertaining to the buildings were:a. What gains are realized and recognized on each
Jones, Able, and Smith want to form Shriver Corporation. They want to accomplish this in the most tax efficient (least costly) way possible. They have asked for advice. The counselor will receive
Cambo Corporation, a calendar-year taxpayer, was formed in 2015 and incurred \(\$ 60,000\) in organizational expenditures. Had the corporation made a proper election under Code Sec. 248, it would
KJJ Corp. was formed on October 10, 2001 by Kimberly Jen (123-45-6789), Jennifer James (234-56\(7890)\) and James \(\operatorname{Kim}(345-67-8901)\). It is a hardware store and is located at 175
Berk Company has several lines of business. It decided that one line was a drag on earnings so it sold it. Proceeds from the sale of the line of business were distributed to its shareholders in
First Inc. redeemed some shares from its shareholders. Several of the shareholders are related. Do the constructive ownership rules possibly affect the tax status of the redemption?
What is the treatment of a sale of stock among related corporations?
What is a preferred stock bailout?
What is Section 306 stock?
How much dividend income is recognized by a seller of Section 306 stock?
Following are four "income and expense" items of Flor Inc.: dividend income (a 65\% dividends-received deduction was claimed); tax-exempt municipal bond interest income; NOL carryover; federal income
Given the following information, determine the taxable portion and return of capital in each situation, as well as accumulated E\&P on January 1, 2019. a. b. C. d. e. 2018 Current E&P $75,000
Genesis Inc. was formed in 2015. Its current \(\mathrm{E} \& \mathrm{P}\) and distributions to shareholders made each year are listed below.What is Genesis Inc.'s year-end accumulated \(E \&
Door Co.'s taxable income was \(\$ 1,000,000\) this year and it paid \(\$ 210,000\) in federal income taxes. Related information for the year follows: 1. \(\$ 4,000\) fines (not deducted to compute
The following information is taken from Lynnso Corporation's records for 2018 :a. Determine Lynnso Corporation's taxable income for 2018.b. Compute Lynnso Corporation's current E\&P for 2018.
Flash Co. distributed \(\$ 40,000\) to Skip Inc., a 25 percent shareholder. Flash Co.'s E\&P applicable to Skip Inc.'s distribution is \(\$ 20,000\) and Skip Inc. had a basis in its stock of \(\$
Special Motors Inc. has E\&P of \(\$ 53,000\). It distributes a building to the individual sole shareholder. The building has a basis of \(\$ 17,000\) and a value of \(\$ 54,000\), is subject to a

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