Questions -
Question 1 - Ellen sells her Section 306 stock during the year for $16,000. Her basis in the stock was $2,000. In 2006, when she received the stock, its fair market value was $12,000 and the corporation's earnings and profits were $10,000. Assuming that Ellen retains her common stock, the result of the sale is:
A. $14,000 ordinary (dividend) income.
B. $14,000 long-term capital gain.
C. $10,000 ordinary (dividend) income and $4,000 long- term capital gain.
D. $12,000 ordinary (dividend) income and $2,000 long-term capital gain.
Question 2 - Babb Corporation owns 80 percent of Atley Corporation's stock and Linda owns the remaining 20 percent of Atley's stock. Babb Corporation's basis for its Atley stock is $300,000 and Linda's Atley stock has a basis of $80,000. Pursuant to a plan of complete liquidation of Atley Corporation, Babb Corporation receives property with a $400,000 adjusted basis and a $480,000 fair market value, and Linda receives property with a $130,000 adjusted basis and a $120,000 fair market value. The bases of the properties to Babb Corporation and Linda are:
A. Babb: $480,000; Linda: $120,000.
B. Babb: $400,000; Linda: $130,000.
C. Babb: $300,000; Linda: $80,000.
D. Babb: $400,000; Linda: $120,000.
Question 3 - The following statements regarding a corporation's liquidating distribution of loss assets to shareholders are all false, except:
A. The liquidating corporation cannot recognize a loss on a liquidating distribution.
B. A loss can be recognized on a subsidiary liquidating distribution to which Code Section 332 applies.
C. The liquidating corporation cannot recognize a loss on a distribution to a shareholder who is a "related taxpayer."
D. The general rule is that all losses are realized and recognized, subject to some exceptions.
Question 4 - ABC Corporation made cash contributions of $35,000 to charitable organizations in 2013. ABC Corporation had taxable income of $280,000 without taking into account its charitable contributions for the taxable year ended December 31, 2013, but after deducting a dividends-received deduction of $34,000. What amount, if any, can ABC Corporation deduct as charitable contributions for 2013?
A. $32,000
B. $31,400
C. $35,000
D. 0
Question 5 - Jack transferred property with an adjusted basis of $45,000 to JKL Corporation. There was a $35,000 mortgage on the property. In exchange for the transferred property, Jack received stock with a fair market value of $65,000 and $25,000 cash, and the corporation assumed the liability on the property. How much gain is recognized by Jack?
A. $0
B. $20,000
C. $25,000
D. $35,000
Question 6 - Jack transferred to JKL Corporation, real property that had an adjusted basis to Jack of $45,000. There was a $35,000 mortgage on the property. In exchange for the transferred property, Jack received stock with a fair market value of $65,000 and $25,000 cash, and the corporation assumed the liability on the property. What is Jack's basis in the stock he received?
A. $0
B. $20,000
C. $25,000
D. $45,000
Question 7 - Jack transferred property with an adjusted basis of $45,000 to JKL Corporation. There was a $35,000 mortgage on the property. In exchange for the transferred property, Jack received all of the stock of the corporation that had a fair market value of $70,000 and cash of $25,000, and the corporation assumed the liability on the property. What is JKL Corporations' basis in the property transferred to it by Jack?
A. $45,000
B. $65,000
C. $70,000
D. $90,000
Question 8 - Jack and Jill each own one-half of the stock of JJ Corporation, which corporation has earnings and profits of $15,000. JJ Corporation distributed to its two shareholders property with a total fair market value of $24,000 and an adjusted basis to the corporation of $24,000. The amount taxable to each shareholder as a dividend is
A. $0
B. $7,500
C. $12,000
D. $15,000