Fed Tax Quiz

(TCOs 1 and 8) Sarah and Emily form Red Corporation with the following investments: Sarah transfers computers worth $200,000 (basis of $80,000), and Emily transfers real estate worth $180,000 (basis of $40,000) and services (worth $20,000) rendered in organizing the corporation. Each is issued 600 shares in Red Corporation. With respect to the transfers, (Points : 5)

Question 2. 2. (TCOs 1 and 8) Hunter and Warren form Tan Corporation. Hunter transfers equipment (basis of $210,000 and fair market value of $180,000), and Warren transfers land (basis of $15,000 and fair market value of $150,000) and $30,000 of cash. Each receives 50% of Tan's stock. As a result of these transfers, (Points : 5)

Question 3. 3. (TCOs 1, 8, and 9) Eagle Corporation owns stock in Hawk Corporation and has taxable income of $160,000 for the year before considering the dividends received deduction. Hawk Corporation pays Eagle a dividend of $200,000, which was considered in calculating the $160,000. What amount of dividends received deduction may Eagle claim if it owns 15% of Hawk's stock? (Points : 5)

Question 4. 4. (TCOs 1 and 8) Emerald Corporation, a calendar year C corporation, was formed and began operations on July 1, 2010. The following expenses were incurred during the first tax year (July 1 through December 31, 2010) of operations:

Assuming a § 248 election, what is the Emerald's deduction for organizational expenditures for 2010? (Points : 5)

Question 5. 5. (TCOs 1 and 9) Beige Corporation (a calendar year taxpayer) has taxable income of $150,000, and its financial records reflect the following for the year.

What is Beige Corporation's current E & P? (Points : 5)

Question 6. 6. (TCOs 1 and 9) Stacey and Andrew each own one half of the stock in Parakeet Corporation, a calendar year taxpayer. Cash distributions from Parakeet are $350,000 to Stacey on April 1 and $150,000 to Andrew on May 1. If Parakeet's current E & P is $60,000, how much is allocated to Andrew's distribution? (Points : 5)

Question 7. 7. (TCOs 1 and 10) Which, if any, of the following can be eligible shareholders of an S corporation? (Points : 5)

Question 8. 8. (TCOs 1 and 10) Samantha owned 1,000 shares in Evita, Inc. an S corporation, that uses the calendar year. On October 11, 2010, Samantha sells all of her Evita stock. Her basis at the beginning of 2010 was $60,000. Her share of the corporate income for 2010 was $22,000, and she receives a distribution of $37,000 between January 1 and October 11, 2010. What is her basis at the time of the sale? (Points : 5)

Question 9. 9. (TCOs 1 and 10) On January 1, 2010, Kinney, Inc. an electing S corporation, has $4,000 of AEP and a balance of $10,000 in AAA. Kinney has two shareholders, Erin and Maine, each of whom owns 500 shares of Kinney's stock. Kinney's 2010 taxable income is $5,000. Kinney distributes $6,000 to each shareholder on February 1, 2010, and distributes another $3,000 to each shareholder on September 1. How is Erin taxed on this distribution? (Points : 5)

Question 10. 10. (TCOs 1 and 10) Lott Corporation in Macon, Georgia, converts to S corporation status in 2010. Lott used the LIFO inventory method in 2009 and had a LIFO inventory of $420,000 (FIFO value of $550,000). How much tax must be added to the 2009 corporate tax liability, assuming that Lott is subject to a 35% tax rate? (Points : 5)