Questions -
Q1. Blue Corporation has taxable income of $320,000. The corporation had total travel and entertainment expenses of $50,000, charitable contributions of $10,000, and tax depreciation in excess of book depreciation of $45,000. Without regard to tax expense for financial statement purposes, what is the book net income of Blue?
a. $215,000
b. $305,000
c. $340,000
d. None of these
Q2. Pitbull owns 100% of Voli Vodka Corporation and his basis in the stock is $105,000. He receives cash of $20,000 and property with FMV of $140,000 and basis of $180,000 in complete liquidation of his ownership interest. What amount of gain or loss should Voli Vodka recognize as a result of this transaction?
a. $5,000 loss
b. $15,000 gain
c. $55,000 gain
d. None of these
Q3. Laura owns 100% of Feathers Company. Feathers has earnings and profits of $12,000. The corporation distributes property with a basis of $9,000 and a FMV of $12,000 to Laura. She must report dividend income of:
a. $2,000
b. $9,000
c. $10,000
d. $12,000
Q4. Triple A Company has earnings and profits of $30,000. The corporation distributes property with a basis of $40,000 and a FMV of $35,000 to Jack, its sole shareholder. His basis in the stock is $30,000. Which of the following statements is correct?
a. Jack reports a nontaxable return of capital of $15,000
b. Jack reports dividend income of $35,000
c. Triple A Company records a loss of $5,000
d. None of these statements are correct.