1. Bread Corporation is a C corporation with earnings of $100,000. It paid $20,000 in dividends to its sole shareholder, Gerald. Gerald also owns 100% of Butter, an S corporation. Butter had net taxable income of $80,000 and made a $15,000 distribution to Gerald. What income will Gerald report from Bread and Butter’s activities?
A) $35,000
B) $95,000
C) $100,000
D) $180,000
2. Jerry transfers two assets to a corporation as part of a Sec. 351 exchange. The first asset has an adjusted basis of $70,000 and a FMV of $50,000. The second asset has an adjusted basis of $70,000 and a FMV of $150,000. The FMV of the stock received is $180,000 and he also receives $20,000 cash. The realized and recognized gain on the second asset is
A) $80,000 realized; $20,000 recognized.
B) $80,000 realized; $15,000 recognized.
C) $20,000 realized; $10,000 recognized.
D) $10,000 realized; $10,000 recognized.
3. Henry transfers property with an adjusted basis of $95,000 and a FMV of $100,000 to a newly formed corporation in a Sec. 351 exchange. Henry receives stock with a FMV of $85,000 and a short-term note with a $15,000 FMV. Henry’s basis in the stock is
A) $100,000.
B) $95,000.
C) $90,000.
D) $85,000.
4. Lynn transfers land having a $50,000 adjusted basis, an $80,000 FMV and $10,000 cash to Allied Corporation in exchange for 100% of Allied’s stock. The corporation assumes the $70,000 mortgage on the land. Which of the following statements is correct?
A) Lynn recognizes no gain and the stock basis is $60,000.
B) Lynn recognizes $10,000 gain and the stock basis is $60,000.
C) Lynn recognizes no gain and the stock basis is $50,000.
D) Lynn recognizes $10,000 gain and the stock basis is zero.
5. Super Corporation gives a painting to a museum for public display on August 6. The painting was purchased on April 3 of the same year for $20,000 and is worth $30,000 at the date of gift. Also, Super accrues a charitable contribution on December 30 and pays the $12,000 contribution on February 1 of the next year. Super Corporation is a calendar-year corporation that uses the accrual method of accounting. Before considering the 10% limitation rule, the maximum deduction for the current year is
A) $12,000.
B) $20,000.
C) $30,000.
D) $32,000.
6. Richards Corporation has taxable income of $280,000 calculated before the charitable contribution deduction and before its dividends-received deduction of $34,000. Richards makes cash contributions of $35,000 to charitable organizations. What is Richards Corporation’s charitable contribution deduction for the current year?
A) $24,600
B) $28,000
C) $31,400
D) $35,000
7. Island Corporation has the following income and expense items for the year.Gross receipts from sales $60,000 Dividends received from 15%-owned domestic corporation 40,000 Expenses connected with sales 30,000 The taxable income of Island Corporation is
A) $100,000.
B) $70,000.
C) $47,000.
D) $42,000.
8. Money Corporation has the following income and expenses for the tax year.Gross profit on sales $200,000 Expenses 700,000 Dividends received from less-than-20%-owned domestic corporations 20,000 What is Money’s net operating loss?
A) $494,000
B) $480,000
C) $520,000
D) $220,000
9. Foggy Corporation has regular taxable income of $1,200,000. It has $250,000 of interest income on private activity bonds and $100,000 of interest on City of New Orleans bonds. How much is Foggy’s preadjustment AMTI?
A) $1,200,000
B) 1,350,000
C) $1,450,000
D) $1,550,000
10. Identify which of the following statements is false.
A) Tax-exempt interest on certain private activity bonds may be taxed under the alternative minimum tax.
B) Tax preference items and adjustments may either increase or decrease taxable income to obtain AMTI.
C) Depending on the date an asset is placed in service, depreciation may be an adjustment to taxable income or a tax preference item for alternative minimum tax purposes.
D) Different depreciation rules are used when computing taxable income and alternative minimum taxable income.
11. Mountaineer, Inc. has the following results: Regular corporate tax liability $400,000Taxable income 2,000,000Preferences 500,000Adjustments (200,000)What is the amount of the alternative minimum tax?
A) $0
B) $60,000
C) $100,000
D) None of the above.
