Questions -
Question 1 - Chris owns 70 percent of ABC Corporation. ABC Corporation had acquired land known as Parcel A in 1984 for $68,000 and held Parcel A for investment purposes. During the current taxable year, ABC Corporation sold Parcel A to Chris for $65,000 which amount was equal to the fair market value of Parcel A. Shortly after receiving Parcel A, Chris sold Parcel A to his friend from college for $73,000. How much gain or loss is realized and recognized by the respective parties as a result of each of the sales?
A. ABC Corporation realized a loss of $3,000 and recognized a loss of $3,000 on the distribution; Chris realized a gain of $8,000 and recognized a gain of 8,000 on the sale.
B. ABC Corporation realized a loss of $3,000 and recognized a loss of 3,000 on the distribution; Chris realized a gain of $5,000 and recognized a gain of $5,000.
C. ABC Corporation realized a loss of $3,000 and recognized a loss of 0; Chris realized a gain of $8,000 and recognized a gain of $5,000.
D. ABC Corporation realized a loss of $3,000 and recognized a loss of 0; Chris realized a gain of $5,000 and recognized a gain of$5,000.
Question 2 - For the current taxable year, HIJ Inc. had gross receipts from operations of $230,000, operating and other expenses of $310,000, and $120,000 of dividends that it received from a 45 percent-owned domestic corporation. For the current taxable year, HIJ Inc. has taxable income or a net operating loss of what amount?
A. $8,000 taxable income.
B. $40,000 taxable income.
C. $56,000 net operating loss.
D. $80,000 net operating loss.
Question 3 - NOP Inc. had the following income and expenses during the current taxable year. Its income from operations was $250,000, its expenses from operations were $120,000, its dividends received (from a 30 percent-owned corporation)) were $80,000, and it made cash charitable contributions of $30,000
How much is NOP Inc.'s charitable contribution deduction for the current taxable year?
A. $14,600.
B. $21,000.
C. $26,000.
D. $30,000.
Question 4 - For the current taxable year, RST Inc.'s gross income from operations was $1,000,000 and its expenses from operations were $1,500,000. RST Inc. also received a $600,000 dividend from a 10 percent-owned corporation. How much is RST Inc.'s dividends-received deduction?
A. 0.
B. $70,000.
C. $320,000.
D. $420,000.
Question 5 - Books and Toys Corporation, a calendar year corporation, had a net operating loss of $50,000 for 2011. Books and Toys Corporation made a proper election to forego the carryback period. For 2012, Books and Toys Corporation correctly deducted $40,000 of the 2011 loss. Books and Toys Corporation will lose the remaining $10,000 of the loss if the loss cannot be deducted by the end of which tax year?
A. 2018.
B. 2021.
C. 2026.
D. 2031.
Question 6 - LMN Inc. liquidated. As part of the liquidation, one shareholder, Larry, who owned 30 percent of the stock of LMN Inc., received as a distribution in exchange for all of his stock in the corporation, inventory worth $90,000 that had a basis to the corporation of $70,000. How much gain was recognized by LMN Inc. as a result of this liquidating distribution and what was the character of the gain?
A. $0 gain.
B. $20,000 capital gain.
C. $20,000 ordinary income.
D. $20,000 Section 1231 gain.
Question 7 - Ben and John formed BCD Inc., a corporation, in 2012. Ben received 80% of the voting common stock, the only class of stock and John received the remaining 20% of the stock. In 2013, Ben transferred additional property to BCD Inc. The property had an adjusted basis to Ben of $40,000 and a fair market value of $50,000 on the date of the transfer. On the same day, and in exchange for the property he transferred to BCD Inc., Ben received cash of $15,000 and additional stock worth $35,000. How much gain was recognized by Ben as a result of this transaction?
A. 0.
B. $10,000.
C. $15,000.
D. $25,000.
Question 8 - Sue transferred a building to her newly formed corporation, RSTU Inc. The building had an adjusted basis to Sue of $75,000 and a fair market value of $150,000 on the date of the transfer. The building was encumbered by a mortgage of $100,000, which RSTU Inc. assumed. On the same day, and in exchange for the building she transferred to RSTU Inc., Sue received 100 percent of RSTU Inc.'s only class of stock. The fair market value of the stock at the date of transfer was $50,000. How much gain was recognized by Sue as a result of this transaction?
A. 0.
B. $25,000.
C. $50,000.
D. $75,000.
Question 9 - Bob created MNO Inc. several years ago and has owned all 10 outstanding shares of MNO Inc. since the creation of MNO Inc. The fair market value of those shares is now $50,000. Bob's friend, Lee, owns a building having a fair market value of $80,000 and an adjusted basis to Lee of $20,000. The building is encumbered by a $30,000 mortgage. Earlier this month, Bob and Lee discussed Lee's becoming involved in the business of MNO Inc., and as a result of these discussions, Lee transferred the building to MNO Inc. and in exchange for the building, MNO Inc. transferred to Lee 10 shares of authorized but not previously issued stock of MNO Inc. After the transaction there were 20 shares of stock issued and outstanding. How much gain was realized and recognized by Lee as a result of this transaction?
A. $30,000 of gain was realized and recognized.
B. $30,000 of gain was realized,0 of which was recognized.
C. $60,000 of gain was realized, $10,000 of which was recognized.
D. $60,000 of gain was realized and recognized.
Question 10 - Al owned all of the outstanding stock of ABC Corporation. Al transferred a building, cash, and IBM stock to ABC Corporation. The adjusted basis and the fair market value of the assets transferred to ABC Corporation, and the amount remaining on the mortgage on the building transferred, were as follows. A building was transferred by Al to ABC Corporation that had an adjusted basis to Al of $20,000, a fair market value of $50,000, and a mortgage of $40,000, that was assumed by the corporation, cash in the amount of $10,000 was transferred, and IBM stock with an adjusted basis to Al of $15,000 and a fair market value of $12,000. In exchange for the assets transferred to ABC Corporation, Al received additional stock of ABC Corporation. How much gain did Al recognize as a result of this transaction?
A. 0.
B. $10,000.
C. $20,000.
D. $27,000.