Question 1: Lab Kennels, Inc. and Wolman Developers agree to exchange two parcels of land and each assume the other's mortgage on the parcel acquired. Lab owns 500 acres within city limits that has a value of $750,000 and a basis of $300,000. It is encumbered by a $200,000 mortgage. Wolman's prop-erty is raw land outside the city that has a value of $900,000, a basis of $400,000, and is encumbered by a $350,000 mortgage.
a. What are Lab Kennels, Inc. and Wolman Developer's realized and recognized gains or losses on the exchange?
b. What are their deferred gains or losses?
c. What are their bases in the land acquired?
Question 2: Clayton Corporation owns business realty that the county condemns on July 15, year 1. The county pays Clayton $400,000 for the property that has an allocated basis of $235,000.
a. What are Clayton's realized and recognized gains, assuming it does not replace the property?
b. What is its recognized gain, assuming it spends $350,000 on replacement property?
c. What is its basis in the replacement property?
d. What is its recognized gain, assuming it spends $500,000 on replacement property?
e. What is its basis in the replacement property?
f. If the corporation has a June 30 ?scal year-end, what is the last date that it can acquire qualifying replacement property?
Question 3: What is the dividend received deduction? What are the percentages and when do they apply? When is the dividend received deduction limited to a percentage of taxable income?
Question 4: Mondial Corporation's ?nancial accounting records show it had gross revenue of $980,000, cost of goods sold of $420,000, operating expenses of $380,000, and $4,000 of dividends received from a 40-percent-owned owned corporation. Its operating expenses included the following:
$6,000 of life insurance premiums on which it was the bene?ciary
$22,000 of meals and entertainment expenses
$30,000 of charitable contributions
a. Determine Mondial Corporation's taxable income.
b. Determine Mondial Corporation's income tax liability.
c. Determine Mondial Corporation's income tax liability if book depreciation is $15,000 less than tax depreciation.