1. A taxpayer contributes property with an adjusted basis of $60,000 and a fair market value of $100,000 to his business entity. If the entity is an S corporation and the trans­action qualifies under § 351, the S corporation's basis for the asset and the shareholder's basis for his stock are:

Asset Basis . . . . . . . . . . . Stock Basis

a. 60,000 . . . . . . . . . . . . . . . $100,000

b. $100,000. . . . . . . . . . . . . $60,000

c. $60,000. . . . . . . . . . . . . . $60,000

d. $100,000. . . . . . . . . . . . .$100,000

e. None of the above.

2. Jasmine Company sold an asset on the first day of the tax year for $400,000. Its regular tax basis was $250,000, and its basis for Federal AMT purposes was $220,000. Because of differences in cost recovery schedules, the state basis in the asset was $200,000. What adjustment, if any, should be made to Federal taxable income in determining the correct taxable income for the typical state?

a. ($20,000).

b. ($50,000).

c. $50,000.

d. $100,000.

e. Some other amount.

3. Straw Corporation realized $800,000 of taxable income from the sales of its products in States X and Z. Straw's activities in both states establish nexus for income tax purposes. Straw's sales, payroll, and property among the states include the following.

	State X	State Z	Totals
Sales	$6,000,000	$4,000,000	$10,000,000
Property	500,000	1,500,000	2,000,000
Payroll	2,000,000	2,000,000	4,000,000

Both states use a three-factor apportionment formula, however X utilizes a double-weighted sales factor in its three-factor apportionment formula. How much of Straw’s taxable income is apportioned to Z?

a. $330,000.

b. $386,668.

c. $440,000.

d. $470,000.

e. None of the above.

Answer rating: 100% (QA)

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