1 Which statement best descrives the concept if the "double taxation" of corporation income?A. Corporate income is subject to two levels of taxation: the regular tax and the alternative minimum taxB. Corporate income is taxed twice at the corporate level: first when earned and than a second time if appreciatC. Corporate income is taxed when earned by a C corporation and then a second time at the shareholder level wD. Corporate income is a subject to two levels of taxation; at the federal level and a second time at a state level2 Which of the following forms of earnings distributions would not be subject to double taxation at the corporateA. DividendB. Stock redemptionC. Partial liquidationD. Compensation paid to a shareholder/employee of the corporation3 Which of the following statements best describes the priority of the tax treatment of a distribution from a corpoA. the distribution is a dividend to the extent of the corporations earnings and profits, than a return of capital, aB. The distribution is a return of capital, than a dividend to the extent of the corporations earnings and profits anC. The distribution is a return of capital thn gain from sale of stock and finally a dividend to the extent of the corD. the shareholder can elect to treat the distribution as either a dividend to the extent of the corporations earnifollowing by gain from sale of stock4 A calendar year corporation has negative current e&p of $500 and accumulated positive e&p of $1,000. the corpto its sole shareholder. Which of the following statements is trueA. 500 will be a dividend because total earnings and profits is 500B. 0 will be a dividend because current earnins and profits are negativeC. 600 will be a diidend because accuulated earnings and profits is 1,000D. up to 600 could be dividend depending on the balance in accumulated earnings and profits on the date of the5 Which of the following payments could be treated as a constructive dividend by the IRS?A. end of year bonus payment to a shareholder/employeeB. rent paid to a shareholder/lessorC. Interest paid to a shareholder/creditorD. All of the above6 Which of the following factors would not be considered in determining if compensation paid to a shareholder/eA. the individuals duties and responsibilitiesB. what infividuals performing in comparable capacities at other companies are paidC. Whether the corporation has a formal compensation policyD. the individuals marginal income tax rate7 Which of the following statements is not considered a potential answer to the dividend puzzle (why do corporatiA. Paying dividends avoids the double taxation of corporate incomeB. Demanding that managers pay out dividends restricts their investment activities and forces then to adopt moC. Paying dividends is a source of investor goodwillD. Dividends are a signal to the capital markets about the health of a corporations activities8 Which of the following stock dividendswould be tax free to the shareholder?A. a 2 for 1 stock split to all holders of common stockB. a stock dividend where the shareholder could choose between cash and stockC. a stock dividendto all holders of preferred stockD. Both a 2 for 1 stock split to all holders of common stock and a stock dividend to all holders of preferred stock9 Which of the folllowing individuals is not considered family for purposes of applying the stock attribution rules tA. parentsB. grandchildrenC. grandparentsD. spouse10 Tammy owns 100 shares in Star Struck Corporation. The other 100 shares are owned by her husband Tommy. WA. A stock redemption that completely terminate Tammys direct interest in a corporation will be treated as an exB. A stock redemption that completely terminate Tammys direct interest in a corporation will be treated as a divC. A stock redemption that completely terminates Tammy’s direct interest in a corporation will be treated as anD. a stock redemption that completely terminates Tammy’s direct interst in a corporatin will be treated as a divid11 Which statement best describes the concpt of realization as it applies to gain or lossA.its the recording of gain or loss on a tax returnB. is the result of an exchange of property rights in a transactionC. realization is the excess of amount realized over adjusted basisD. is the excess of adjusted basis over amount realized12 which of the following amounts is not included in the computation of amount realized in an exchangeA. cash receivedB. Fair market value of property receivedC. selling expensesD. Adjusted basis of property transferred13 Which of the following amoutns is not included in the computation of a property’s adjusted basis in an exchangeA. selling expenses incurred by the buyerB. acquisition cost of the buyerC. Capital improvements made to the property by the buyerD. Depreciation of the property by the buyer14 Which of the following statements best describes the tax law approach to recognizing gain or loss realized in anA. Gain and loss realized is not recognized unless specifically stated otherwise in the Internal revenue Code?B. Gain and loss realized is recognized unless specifically stated otherwise in the Internal Revenue CodeC. Gain realized is recognized unless specifically stated otherwise in the Internal Revenue Code but loss realizedis not recognized unless specifically stated otherwise in the Internal Revenue CodeD. Loss realized is recognized unless specifically stated otherwise in the Internal Revenue Code, but gain realizedunless specifically stated otherwise in the Internal Revenue Code15 Which of the following requirements do not have to be met in a section 351 transaction?A. each transferor of property must receive stock equal to at least 80% of the fair market value of the property tB. In the aggregate the transferors of property to the corporation must collectively control the corporation immeC. only property transferred to a corporation is eligible for deferralD. All transfers of property to a corporation must be made simultaneously to qualify for deferral16 Which of the following statements best describes the concept of control as it applies to a section 351 transactioA. Control is defined as the ownershipof80% or more of a corporations voting stockB.Control is defined as the ownership of 80% or more of the fair market value of a corporations stockC. Cotrol is defined as the ownership of 80% or more ofa corporations voting stock and 80% or more of the fairvD. Control is defined as the ownership of 80% ore more of a corporations voting stock and 80%or more of the toof shares of each class of nonvoting stock17 Which of the following statements best describes the impact of receiving boot in a section 351 transaction?A. Boot received has no impact on the recognition of gain or loss realized in a section 351 transactionB. Boot received causes gain realized to be recognized byt not loss realizedC. Boot received causes loss realized to be recognized but not gain realizedD. Boot received causes gain and loss realized to be recognized18 Which of the following statements best describes the tax results to a shreaholder in a section 351 transaction wto the corporation are assumed by the corporationA. Liabilities assumed by a corporation on section 351 transfer are always treated as bootB. liabilities assumed by a corporation on secion 351 transfer are never treated as bootC. Liabilities assumed by a corporation on section 351 transfer are treated as boot if the total liabilities assumedbasis of the assets transferredD. Liabilities assumed by a corporation on section 351 transfer are treated as boot if there is no business purposof the liabilities by the corporation19 Which of the following statements best descibes the built in loss rules that apply to property transferred to a coA.If the basis of a property transferred to a corporation under section 351 exceeds its fair market value, the corpB. if the basis of a property transferred to a corporation under section 351 exceeds its fair market value, the corpequal to the property’s tax basis in the hands of the shareholderC. if the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fairD. If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair20 Which of the following statements best describes the recognition of loss on property transferred to shareholderA. the liquidated corporation always recognizes loss on the distribution of property in coplete liquidation of theB. The liquidated corporation never recognizes loss on the distribution of property in complete liquidation of theC. The liquidated corporations recognizes loss on the distribution of property in complete liquidation of the corpis distributed to individuals who are not related parties to the corporationD. The liquidated corporation recognizes loss on the distribution of property in complete liquidation of the corpoproperty is distributed to individuals who are related parties to the corporationative minimum taxa second time if appreciated propert is distributed to a shareholderat the shareholder level when distributed as a dividendcond time at a state leveltaxation at the corporate and shareholder leveldistribution from a corporation to a shareholder?than a return of capital, and finally gain from sale of stockons earnings and profits and finally gain from sale of stocknd to the extent of the corporations earnings and profitsof the corporations earnings and profits or a return of capitalve e&p of $1,000. the corporation makes a $600 distributiond profits on the date of the distributionn paid to a shareholder/employee is reasonabled puzzle (why do corporations pay dividends)?d forces then to adopt more efficient investment policiesholders of preferred stock are tax free to the shareholdere stock attribution rules to a stock redemptiony her husband Tommy. Which of the following statements is true?on will be treated as an exchange for tax purposeson will be treated as a dividend for tax purposestion will be treated as an exchange if Tammy waives the familyattribution rules and files a triple I agreement with the IRSn will be treated as a dividend to the extent that the redemption exceeds Tammy’s tax basis in the redeemed sharesin an exchangeusted basis in an exchangegain or loss realized in an exchange?ternal revenue Code?al Revenue Codeue Code but loss realized is not recognizedue Code, but gain realized is not recognizedet value of the property transferredtrol the corporation immediately after the transferso a section 351 transactions?porations stockd 80% or more of the fairvalue of a corporations stockand 80%or more of the total numbertion 351 transaction?351 transactionsection 351 transaction when liabilitieson property transferrede total liabilities assumed exceed the totalere is no business purpose for the assumptionoperty transferred to a corporation under section 351?air market value, the corporation will always take a tax basis in the property equal to the propertys fair market valuefair market value, the corporation will always take a tax basis in the propertyexceeds its aggregate fair market value, the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggrexceeds its aggregate fair maket alue, the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregransferred to shareholders in complete liquidation?coplete liquidation of the corporationomplete liquidation of the corporationete liquidation of the corporation if the propertyte liquidation of the corporation only if thewith the IRSn cannot exceed the aggregate fair market value of the propertycannot exceed the aggregate tax basis of the property1 Grand river corporation reported taxable income of $500,000 in 2013 and paid federal income taxes of $170,000tax exempt income of $1,000 and deferred gain on an installment sale of $25,000. the corporations current earnA. $524,000B. $500,000C. $354,000D. $331,0002 Tar Heel Corporation had current and accumulated e&p of $500,000 at December 31, 2014. On december 31, thdistributionof land to its sole shareholder, William Roy. The lands fair market value was $100,000 and its tax andAssumed a mortgageattached to the land of $10,000. The tax consequences of the distribution to William in 201A. $100,000 dividendand tax basis of the landB. $100,000 dividend and a tax basis in the land $90,000C. $90,000 dividend and tax basis of the land of $100,000D. $90,0000 dividend and tax basis in the land3 Viking crporation is owned equally by Sven and his wife Olga, each of whomhold100 shares in the company. Vikishares of Sven’sstock in the company on Dec. 31, 2014. Viking paid Sven $2,000 per share His income tax basis iViking has toal e&p of $500,000. What are the taxconsequences to Sven because of the stock redemptionA. $75,000 capital gain and tax basis of remaining shares of $1,000B. $75,000 capital gain and tax basis of remaining shares $2,000C. $150,000 capital gain and tax basis of remaining shares $1,000B. $150,000 capital gain and tax basis of remaining shares $4,0004 Sybill transfers property with a tax basis of $5,000 and a fair market value of $6,000 to a corporation in xchangemarket value of $3,000 and $2,000 in a transaction that qualifies fordeferral under section 351. The corporationon the property transferred. What is Sybil’s tax basis in the stock received in the exchange?A. $6,000B. $5,000C. $4,000D. $3,0005 Rahelle transfers property with a tax basis of $800 and a fair market value of $900 to a corporation in exchangemarket valueof $750 and $50 in a transaction that qualifies for deferral under section 351. The corporations taxreceived in the exchangeA. $900B. $850C. $800D. $7506 Amy transfers property with a tax basis of $900 and a fair market value of $600 to a corporation in exchange forvalue of $450 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability oproperty transferred. What is Amy’stax basis in the stock received in the exchange?A. $900B. $750C. $650D. $450income taxes of $170,000. Not included in the computation was a disallowed meals and entertainment expense of $2000corporations current earnings and profits for 2013 would be2014. On december 31, the company made as $100,000 and its tax and e&p basis to Tar Heel was $25,000. Williamtribution to William in 2013 would behares in the company. Viking redeemed 75are His income tax basis in each share is $1,000.e stock redemptiona corporation in xchange for stock with a fairtion 351. The corporation assumed a liability of $1,000corporation in exchange for stock with a fair351. The corporations tax basis in the propertyrporation in exchange for stock with a fair marketation assumed a liability of$150 on thense of $2000

Published by

Essays

View all posts