Kaplan University AC 507 Unit 5 Quiz

1. Trudi Corporation has a building that it needs to sell or exchange because of growth in its business. If Trudi sells the building, it will have a gain of $450,000. What is the amount of taxes that Trudi will avoid paying if it can exchange the building? The corporation has $1,000,000 of taxable income from operations for the current year. (Points : 1)
        $90,000
        $153,000
        $175,500
        $450,000
        None of the above

2. In early 2011, Conrad Corporation discovered their bookkeeper had embezzled $30,000 over the last three years at a rate of approximately $10,000 per year. Conrad also suffered uninsured hurricane damage of $40,000 late in 2011 in a presidentially declared disaster area. If Conrad wants to deduct its losses at the earliest time possible, what are the amounts and year(s) of its loss deduction? (Points : 1)
        2011 = $70,000
        2010 = $30,000, 2010 = $40,000
        2010 = $40,000, 2011 = $30,000
        2009 = $10,000, 2010 = $10,000; 2011 = $50,000
        None of the above

3. Sam's land was condemned for a sewage treatment plant. He received $600,000 for the land that had a basis of $650,000. What is his realized and recognized gain or loss, respectively, on this involuntary conversion? (Points : 1)
        ($50,000), ($50,000)
        ($50,000), 0
        $50,000, $50,000
        0, 0
        None of the above

4. Which of the following is not a characteristic of involuntary conversions? (Points : 1)
        Gain only is deferred
        The taxpayer can receive cash to invest in qualifying replacement property
        The provision applies to both realty and personalty
        All of these are characteristics
        None of these are characteristics

5. The taxpayer-use test for qualifying replacement property (Points : 1)
        applies only to personalty
        requires replacement property used by the taxpayer to be used in the same business as the converted property
        only requires leased realty to be replaced with other leased realty
        Is more restrictive than the functional-use test

6. Which of the following would be an indication that corporate debt is disguised equity? (Points : 1)
        Debt is issued to the shareholders in the same proportion as stock
        The debt has a specified maturity date
        The debt has a specified interest rate
        Interest is paid annually
        None of the above

7. A corporation that owns 72 percent of all the outstanding stock of another corporation: (Points : 1)
        May not file a consolidate return
        May file a consolidated return
        May take a 100 percent dividend received deduction
        May take a 70 percent dividend received deduction
        Is the parent of the 72 percent-owned company

8. A clothing manufacturing corporation donates last year's inventory to the Red Cross for use in its disaster relief efforts. The clothes have a fair market value of $200,000 and a basis to the corporation of $75,000. What is its charitable contribution deduction? (Points : 1)
        $200,000
        $150,000
        $137,500
        $75,000

9. A corporation has pre-tax book income of $324,000. In determining this income, the corporation included $2,000 of tax-exempt interest, $6,000 of dividends from an affiliated corporation, a capital loss of $50,000 and $3,000 of excess book depreciation. What is the corporation’s taxable income? (Points : 1)
        $369,000
        $328,000
        $269,000
        $263,000
        

10. The Willow Corporation reported $400,000 of taxable income. In making a conversion to book income, the accountant had to adjust for the following: a $25,000 Section 179 deduction, but book depreciation would have been $5,000; a fine of $12,500 for overweight trucks; and a net capital loss of $10,000. What is Willow Corporation’s book income? (Points : 1)
        $422,500
        $412,500
        $402,500
        $397,500
        None of the above