Deck 2: Corporations: Introduction and Operating Rules

Question 1

Donald owns a 60% interest in a partnership that earned $230,000 in the current year. He also owns 60% of the stock in a C corporation that earned $230,000 during the year. Donald received $50,000 in distributions from each of the two entities during the year. With respect to this information, Donald must report $188,000 of income on his individual income tax return for the year.

Answer 1

True

Question 2

The corporate marginal tax rates range from 10% to 39%, while the individual marginal tax rates range from 15% to 35%.

Answer 2

True

Question 3

Eagle Company, a partnership, had a short-term capital loss of $10,000 during the year. Aaron, who owns 25% of Eagle, will report $2,500 of Eagle's short-term capital loss on his individual tax return.

Answer 3

True

Question 4

Albatross, a C corporation, had $125,000 net income from operations and a $10,000 short-term capital loss in 2011. Albatross Corporation's taxable income is $115,000.

Question 5

Rose is a 50% partner in Wren Partnership. During the year, Wren earned net profit of $100,000 ($210,000 gross income - $110,000 operating expenses) and distributed $20,000 to each partner. Rose must report Wren Partnership profit of $20,000 on her Federal income tax return.

Question 6

Quail Corporation is a C corporation with net income of $300,000 during 2011. If Quail paid dividends of $50,000 to its shareholders, the corporation must pay tax on $300,000 of net income. Shareholders must report the $50,000 of dividends as income.

Question 7

Thrush Corporation files Form 1120, which reports taxable income of $110,000. The corporation's tax is $26,150.

Question 8

Under the "check-the-box" Regulations, a single-member LLC that fails to elect to be to treated as a corporation will be taxed as a sole proprietorship.

Question 9

There is no Federal income tax assessed on partnerships (including those formed as LLCs) or S corporations. Since all states follow the Federal approach as to entity taxation, state income taxation is a neutral factor in the selection of an entity form.

Question 10

The passive loss rules apply to closely held C corporations and to personal service corporations but not to S corporations.

Question 11

Double taxation of corporate income results because dividend distributions are included in a shareholder's gross income but are not deductible by the corporation.

Question 12

A calendar year C corporation with average annual gross receipts of $5 million or less must use the cash method of accounting.

Question 13

Unlike individual taxpayers, corporate taxpayers do not receive a preferential tax rate with respect to long-term capital gains.

Question 14

Jake, the sole shareholder of Peach Corporation, a C corporation, has the corporation pay him $100,000. For tax purposes, Jake would prefer to have the payment treated as salary instead of dividend.

Question 15

Katherine, the sole shareholder of Purple Corporation, a calendar year C corporation, has the corporation pay her a salary of $450,000 in the current year. The Tax Court has held that $150,000 represents unreasonable compensation. Purple Corporation's taxable income is unaffected by the Tax Court's determination.

Question 16

Olga's proprietorship earned a net profit of $95,000 during the year and she withdrew $70,000 of this profit. Olga must report $70,000 net income from the proprietorship on her individual income tax return (Form 1040).

Question 17

Owl Corporation, a C corporation, recognizes a gain on the sale of a § 1250 asset in the current year. Owl had used the straight-line method for depreciating the realty. Some of Owl's gain on the sale of the realty will be treated as depreciation recapture (ordinary income).

Question 18

Rajib is the sole shareholder of Robin Corporation, a calendar year S corporation. Robin earned net profit of $350,000 ($520,000 gross income - $170,000 operating expenses) and distributed $80,000 to Rajib. Rajib must report Robin Corporation profit of $350,000 on his Federal income tax return.

Question 19

On December 31, 2011, Lavender, Inc., an accrual basis C corporation, accrues a $90,000 bonus to Barry, its vice president and a 70% shareholder. Lavender pays the bonus to Barry, who is a cash basis taxpayer, on March 15, 2012. Lavender can deduct the bonus in 2012, the year in which it is included in Barry's gross income.

Question 20

As a general rule, a personal service corporation (PSC) must use a calendar year as its accounting period.

Question 21

An expense that is deducted in computing net income per books but not deductible in computing taxable income is an addition item on Schedule M-1.

Question 22

No dividends received deduction is allowed unless the corporation has held the stock for more than 45 days.

Question 23

Ed, an individual, incorporates two separate businesses that he owns by establishing two new corporations. Each corporation generates taxable income of $50,000. Each corporation will have a tax liability of $7,500.

Question 24

Generally, corporations with no taxable income must file a Form 1120.

Question 25

Peach Corporation had $210,000 of active income, $45,000 of portfolio income, and a $230,000 passive loss during the year. If Peach is a closely held C corporation that is not a PSC, it can deduct $230,000 of the passive loss in the year.

Question 26

In the current year, Zircon Corporation donated scientific property worth $300,000 to City University (a qualified charitable organization) to be used in research. The basis of the property was $140,000, and Zircon had held it for ten months as inventory. Zircon Corporation may deduct $220,000 as a charitable contribution (ignoring the taxable income limitation).

Question 27

On December 20, 2011, the directors of Quail Corporation (an accrual basis, calendar year taxpayer) authorized a cash donation of $5,000 to the American Cancer Society, a qualified charity. The payment, which is made on March 15, 2012, may be claimed as a deduction for tax year 2011.

Question 28

A personal service corporation with taxable income of $100,000 will have a tax liability of $22,250.

Question 29

The due date (not including extensions) for filing a 2010 Federal income tax return for a calendar year C corporation (Form 1120) is April 15, 2011.

Question 30

The dividends received deduction may be subject to a limitation based on a percentage of taxable income computed without regard to the NOL deduction, the domestic production activities deduction, the dividends received deduction, and any capital loss carryback to the current tax year.

Question 31

Azul Corporation, a calendar year C corporation, received a dividend of $50,000 from Naranja Corporation. Azul owns 10% of the Naranja Corporation stock. Assuming it is not subject to the taxable income limitation, Azul's dividends received deduction is $35,000.

Question 32

Heron Corporation, a calendar year C corporation, had an excess charitable contribution for 2010 of $5,000. In 2011, Heron made a further charitable contribution of $20,000. Heron's 2011 deduction is limited to $15,000 (10% of taxable income). The current year's contribution must be applied first against the $15,000 limitation.

Question 33

Income that is included in net income per books but not included in taxable income is an addition item on Schedule M-1.

Question 34

Black Corporation, an accrual basis taxpayer, was formed and began operations on February 1, 2011. During its first year of operations (February 1 - December 31, 2011), Black incurred the following expenses: fee paid to state of incorporation of $2,000, accounting and legal services incident to organization of $9,000, and expenses related to the printing and sale of stock certificates of $10,000. Black has $11,000 of qualified organizational expenditures that it may elect to amortize.

Question 35

On December 31, 2011, Flamingo, Inc., a calendar year, accrual method C corporation, accrues a bonus of $50,000 to its president (a cash basis taxpayer), who owns 75% of the corporation's outstanding stock. The $50,000 bonus is paid to the president on February 1, 2012. For Flamingo's 2011 Form 1120, the $50,000 bonus will be a subtraction item on Schedule M-1.

Question 36

For purposes of the estimated tax payment rules, a "large corporation" is defined as a corporation that had an average taxable income of $1 million or more over the preceding three-year period.

Question 37

Generally, corporate net operating loss can be carried back 3 years and forward 5 years to offset taxable income for those years.

Question 38

A corporation may elect to amortize startup expenditures over the 60-month period beginning with the month in which the corporation begins business.

Question 39

In the current year, Oriole Corporation donated a painting worth $75,000 to the Texas Art Museum, a qualified public charity. The museum included the painting in its permanent collection. Oriole Corporation purchased the painting 5 years ago for $25,000. Oriole's charitable contribution deduction is $25,000 (ignoring the taxable income limitation).

Question 40

For a corporation in 2011, the domestic production activities deduction is equal to 9% of the higher of (1) qualified production activities income or (2) taxable income. However, the deduction cannot exceed 50% of the W-2 wages related to qualified production activities income.

Question 41

Schedule M-2 is used to reconcile unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at the end of the year.

Question 42

Patrick, an attorney, is the sole shareholder of Gander Corporation. Gander is a personal service corporation with a fiscal year ending September 30. The corporation paid Patrick a salary of $294,000 during its fiscal year ending September 30, 2011. How much salary must Gander pay Patrick during the period October 1 through December 31, 2011, to permit the corporation to continue to use its fiscal year without negative tax effects?

A) $0.
B) $73,500.
C) $220,500.
D) $294,000.
E) None of the above.

Question 43

Falcon Corporation, a C corporation, had gross receipts of $3 million in 2008, $7 million in 2009, and $6 million in 2010. Hawk Corporation, a personal service corporation (PSC), had gross receipts of $3 million in 2008, $5 million in 2009, and $4 million in 2010. Which of the corporations will be allowed to use the cash method of accounting in 2011?

A) Neither Falcon Corporation nor Hawk Corporation.
B) Both Falcon Corporation and Hawk Corporation.
C) Falcon Corporation only.
D) Hawk Corporation only.
E) None of the above.

Question 44

Juanita owns 45% of the stock in a C corporation that had a profit of $120,000 in 2011. Carlos owns a 45% interest in a partnership that had a profit of $120,000 during the year. The corporation distributed $20,000 to Juanita, and the partnership distributed $20,000 to Carlos. Which of the following statements relating to 2011 is incorrect?

A) Juanita must report $20,000 of income from the corporation.
B) The corporation must pay corporate tax on $120,000 of income.
C) Carlos must report $20,000 of income from the partnership.
D) The partnership is not subject to a Federal entity-level income tax.
E) None of the above.

Question 45

Ivory Corporation, a calendar year, accrual method C corporation, has two cash method, calendar year shareholders who are unrelated to each other. Craig owns 55% of the stock, and Oscar owns the remaining 45%. During 2011, Ivory paid a salary of $200,000 to each shareholder. On December 31, 2011, Ivory accrued a bonus of $50,000 to each shareholder. Assuming that the bonuses are paid to the shareholders on February 1, 2012, compute Ivory Corporation's 2011 deduction for the above amounts.

A) $0.
B) $250,000.
C) $400,000.
D) $450,000.
E) $500,000.

Question 46

Which of the following statements is incorrect about LLCs and the check-the-box Regulations?

A) A limited liability company with one owner can elect to be taxed as a corporation.
B) All 50 states have passed laws that allow LLCs.
C) An entity with more than one owner and formed as a corporation cannot elect to be taxed as a partnership.
D) If a limited liability company with one owner does not make an election, the entity is taxed as a sole proprietorship.
E) If a limited liability company with more than one owner does not make an election, the entity is taxed as a corporation.

Question 47

Canary Corporation, which sustained a $5,000 net capital loss during the year, will enter $5,000 as a addition item on Schedule M-1.

Question 48

In 2011, Bluebird Corporation had net income from operations of $75,000. Further, Bluebird recognized a long-term capital loss of $30,000, and a short-term capital gain of $10,000. Which of the following statements is correct?

A) Bluebird Corporation may use the capital loss to offset the capital gain and must carry the net capital loss of $20,000 forward five years as a long-term capital loss.
B) Bluebird Corporation may deduct $13,000 of the capital loss in 2011 and may carry forward the remainder of the capital loss indefinitely to offset capital gains.
C) Bluebird Corporation will have taxable income in 2011 of $55,000.
D) Bluebird Corporation will have taxable income in 2011 of $75,000 and will have a net capital loss of $20,000 that can be carried back 3 years and forward 5 years.
E) None of the above.

Question 49

Elk, a C corporation, has $370,000 operating income and $290,000 operating expenses during the year. In addition, Elk has a $10,000 long-term capital gain and a $17,000 short-term capital loss. Elk's taxable income is:

A) $90,000.
B) $80,000.
C) $73,000.
D) $63,000.
E) None of the above.

Question 50

Schedule M-3 is similar to Schedule M-1 in that the form is designed to reconcile net income per books with taxable income. However, an objective of Schedule M-3 is more transparency between financial statements and tax returns than that provided by Schedule M-1.

Question 51

Glen and Michael are equal partners in Trout Enterprises, a calendar year partnership. During the year, Trout Enterprises had gross income of $400,000 and operating expenses of $220,000. In addition, the partnership sold land that had been held for investment purposes for a long-term capital gain of $100,000. During the year, Glen withdrew $60,000 from the partnership, and Michael withdrew $60,000. Discuss the impact of this information on the taxable income of Trout, Glen, and Michael.

A) Trout pays tax on $0 income, Glen's taxable income increases by $60,000, and Michael's taxable income increases by $60,000.
B) Trout pays tax on $280,000 income, Glen's taxable income increases by $60,000, and Michael's taxable income increases by $60,000.
C) Trout pays tax on $0 income, Glen's taxable income increases by $200,000, and Michael's taxable income increases by $200,000.
D) Trout pays tax on $0 income, Glen's taxable income increases by $140,000, and Michael's taxable income increases by $140,000.
E) None of the above.

Question 52

Norma formed Hyacinth Enterprises, a proprietorship, in 2011. In its first year, Hyacinth had operating income of $400,000 and operating expenses of $240,000. In addition, Hyacinth had a long-term capital loss of $10,000. Norma, the proprietor of Hyacinth Enterprises, withdrew $75,000 from Hyacinth during the year. Assuming Norma has no other capital gains or losses, how does this information affect her taxable income for 2011?

A) Increases Norma's taxable income by $75,000.
B) Increases Norma's taxable income by $160,000.
C) Increases Norma's taxable income by $150,000 ($160,000 ordinary business income - $10,000 long-term capital loss).
D) Increases Norma's taxable income by $157,000 ($160,000 ordinary business income - $3,000 long-term capital loss).
E) None of the above.

Question 53

Luis is the sole shareholder of a C corporation, and Eduardo owns a sole proprietorship. Both businesses were started in 2011, and each business has a long-term capital gain of $20,000 for the year. Neither business made any distributions during the year. With respect to this information, which of the following statements is incorrect?

A) Eduardo must report a $20,000 long-term capital gain on his 2011 tax return.
B) Louis's corporation does not receive a preferential tax rate on the $20,000 long-term capital gain.
C) Luis must report a $20,000 long-term capital gain on his 2011 tax return.
D) Eduardo receives a preferential tax rate on a long-term capital gain of $20,000.
E) None of the above.

Question 54

Flycatcher Corporation, a C corporation, has two equal individual shareholders, Nancy and Pasqual. In the current year, Flycatcher earned $200,000 net profit and paid a dividend of $40,000 to each shareholder. Regardless of any tax consequences resulting from their interests in Flycatcher, Nancy is in the 28% marginal tax bracket and Pasqual is in the 35% marginal tax bracket. With respect to the current year, which of the following statements is incorrect?

A) Flycatcher can avoid the corporate tax altogether by paying out all $200,000 of net profit as dividends to the shareholders.
B) Nancy incurs income tax of $6,000 on her dividend income.
C) Pasqual incurs income tax of $6,000 on his dividend income.
D) Flycatcher pays corporate tax on $200,000.
E) None of the above.

Question 55

Bear Corporation has a net short-term capital gain of $35,000 and a net long-term capital loss of $200,000 during 2011. Bear Corporation has taxable income from other sources of $600,000. Prior years' transactions included the following: Compute the amount of Bear's capital loss carryover to 2012.

A) $0.
B) $60,000.
C) $105,000.
D) $165,000.
E) $200,000.

Question 56

On December 31, 2011, Peregrine Corporation, an accrual method, calendar year taxpayer, accrued a performance bonus of $100,000 to Charles, a cash basis, calendar year taxpayer. Charles is president and sole shareholder of the corporation. When can Peregrine deduct the bonus?

A) In 2011, if the bonus was authorized by the Board of Directors and payment was made on or before March 15, 2012.
B) In 2012, if payment was made at any time during that year.
C) In 2011, if payment was made on or before March 15, 2012.
D) In 2012, but only if payment was made on or before March 15, 2012.
E) None of the above.

Question 57

Francisco is the sole owner of Rose Company. For 2011, the only income of Rose was a long-term capital gain of $25,000. The business made no distributions during the year to Francisco. Irrespective of Rose Company, Francisco's marginal tax rate is 35% and he has no capital asset transactions. Which of the following statements is incorrect?

A) If Rose Company is a sole proprietorship or S corporation, Francisco must report the $25,000 long-term capital gain on his personal income tax return.
B) If Rose Company is a C corporation, Francisco will report none of the $25,000 long-term capital gain on his personal income tax return.
C) If Rose Company is a sole proprietorship or S corporation, a preferential tax rate applies to the $25,000 long-term capital gain.
D) If Rose Company is a C corporation, a preferential tax rate does not apply to the $25,000 long-term capital gain.
E) None of the above.

Question 58

A corporation with $10 million or more in assets must file Schedule M-3 (instead of Schedule M-1).

Question 59

Bjorn owns a 60% interest in an S corporation that earned $150,000 in 2011. He also owns 60% of the stock in a C corporation that earned $150,000 during the year. The S corporation distributed $30,000 to Bjorn and the C corporation paid dividends of $30,000 to Bjorn. How much income must Bjorn report from these businesses?

A) $0 income from the S corporation and $30,000 income from the C corporation.
B) $90,000 income from the S corporation and $30,000 income from the C corporation.
C) $90,000 income from the S corporation and $0 income from the C corporation.
D) $30,000 income from the S corporation and $30,000 of dividend income from the C corporation.
E) None of the above.

Question 60

Jason, an architect, is the sole shareholder of Purple Corporation, a personal service corporation. The corporation paid Jason a salary of $225,000 during its fiscal year ending October 31, 2011. How much salary must Purple pay Jason during the period November 1 through December 31, 2011, to permit the corporation to continue to use its fiscal year without negative tax effects?

A) $18,750.
B) $37,500.
C) $187,500.
D) $225,000.
E) None of the above.

Question 61

Eagle Corporation owns stock in Hawk Corporation and has taxable income of $100,000 for the year before considering the dividends received deduction. Hawk Corporation pays Eagle a dividend of $130,000, which was considered in calculating the $100,000. What amount of dividends received deduction may Eagle claim if it owns 25% of Hawk's stock?

A) $0.
B) $80,000.
C) $100,000.
D) $104,000.
E) None of the above.

Question 62

Copper Corporation owns stock in Bronze Corporation and has net operating income of $900,000 for the year. Bronze Corporation pays Copper a dividend of $150,000. What amount of dividends received deduction may Copper claim if it owns 65% of Bronze stock (assuming Copper's dividends received deduction is not limited by its taxable income)?

A) $97,500.
B) $105,000.
C) $120,000.
D) $150,000.
E) None of the above.

Question 63

Which of the following statements is incorrect with respect to the treatment of net operating losses by corporations?

A) A corporation may elect to forgo the carryback period and just carryforward an NOL.
B) A corporation may claim a dividends received deduction in computing an NOL.
C) An NOL is generally carried back 2 years and forward 20 years.
D) Unlike individuals, corporations do not adjust their NOLs for net capital losses or nonbusiness deductions.
E) None of the above.

Question 64

George Judson is the sole shareholder and employee of Black Corporation, a C corporation that is engaged exclusively in engineering services. During the year, Black has gross revenues of $420,000 and operating expenses (excluding salary) of $200,000. Further, Black Corporation pays George a salary of $190,000. The salary is reasonable in amount and George is in the 35% marginal tax bracket irrespective of any income from Black. Assuming that Black Corporation distributes all after-tax income as dividends, how much total combined income tax do Black and George pay in the current year? (Ignore any employment tax considerations.)

A) $66,675.
B) $79,925.
C) $83,325.
D) $87,500.
E) None of the above.

Question 65

In the current year, Amber, Inc., a calendar C corporation, has income from operations of $200,000 and operating deductions of $225,000. Amber also had $30,000 of dividends from a 25% stock ownership in a domestic corporation. Which of the following statements is incorrect with respect to Amber's net operating loss deduction?

A) The NOL is carried back 3 years and forward 10 years by Amber.
B) Amber's NOL is $19,000.
C) A dividends received deduction is allowed in computing Amber's NOL.
D) Amber can elect to forgo the carryback period and only carry forward the NOL.
E) None of the above.

Question 66

Beige Corporation, a C corporation, purchases a warehouse on December 4, 2002, for $500,000. Straight-line depreciation is taken in the amount of $104,701 before the property is sold on February 8, 2011, for $600,000. What is the amount and character of the gain recognized by Beige on the sale of the realty?

A) Ordinary income of $0 and § 1231 gain of $204,701.
B) Ordinary income of $104,701 and § 1231 gain of $100,000.
C) Ordinary income of $40,940 and § 1231 gain of $163,760.
D) Ordinary income of $20,940 and § 1231 gain of $183,761.
E) None of the above.

Question 67

In the current year, Plum Corporation, a computer manufacturer, donated 100 laptop computers to a local school district (a qualified educational organization). The computers were constructed by Plum earlier this year, and the school district allocated the computers among its various schools where they will be used for educational purposes. Plum's basis in the computers is $50,000, and their fair market value is $120,000. What is Plum's deduction for the contribution of the computers (ignoring the taxable income limitation)?

A) $0.
B) $50,000.
C) $85,000.
D) $100,000.
E) $120,000.

Question 68

Azul Corporation, a personal service corporation, had $300,000 of active income, $40,000 of portfolio income, and a $190,000 passive loss during the year. How much is Azul's taxable income?

A) $110,000.
B) $150,000.
C) $300,000.
D) $340,000.
E) None of the above.

Question 69

Which of the following statements is incorrect regarding the dividends received deduction?

A) A corporation must hold stock for more than 90 days in order to qualify for a deduction with respect to dividends on such stock.
B) The taxable income limitation does not apply with respect to the 100% deduction available to members of an affiliated group.
C) If a stock purchase is financed 75% by debt, the deduction for dividends on such stock is reduced by 75%.
D) The taxable income limitation does not apply if the normal deduction (i.e., 70% or 80% of dividends) results in a net operating loss for the corporation.
E) None of the above.

Question 70

Hippo, Inc., a calendar year C corporation, manufactures golf gloves. For 2011, Hippo had taxable income (before DPAD) of $800,000, qualified domestic production activities income of $950,000, and W-2 wages related to qualified production activities income of $130,000. Hippo's domestic production activities deduction for 2011 is:

A) $0.
B) $65,000.
C) $72,000.
D) $85,500.
E) None of the above.

Question 71

During the current year, Violet, Inc., a closely held corporation (not a PSC), has $130,000 of passive loss, $90,000 of active business income, and $70,000 of portfolio income. How much is Violet's taxable income for the current year?

A) $30,000.
B) $70,000.
C) $90,000.
D) $160,000.
E) None of the above.

Question 72

Emerald Corporation, a calendar year C corporation, was formed and began operations on July 1, 2011. The following expenses were incurred during the first tax year (July 1 through December 31, 2011) of operations: Assuming a § 248 election, what is the Emerald's deduction for organizational expenditures for 2011?

A) $0.
B) $533.
C) $5,367.
D) $5,500.
E) None of the above.

Question 73

During the current year, Thrasher, Inc., a closely held personal service corporation, has $67,500 of active business income, $52,500 of portfolio income, and $120,000 of passive loss. How much of the passive loss can Thrasher deduct in the current year?

A) $0.
B) $52,500.
C) $67,500.
D) $120,000.
E) None of the above.

Question 74

During 2011, Sparrow Corporation, a calendar year C corporation, had operating income of $510,000, operating expenses of $370,000, a short-term capital loss of $25,000, and a long-term capital gain of $80,000. How much is Sparrow's tax liability for 2011?

A) $46,100.
B) $59,300.
C) $69,050.
D) $76,050.
E) None of the above.

Question 75

Red Corporation, which owns stock in Blue Corporation, had net operating income of $200,000 for the year. Blue pays Red a dividend of $40,000. Red takes a dividends received deduction of $28,000. Which of the following statements is correct?

A) Red owns 80% of Blue Corporation.
B) Red owns 20% or more, but less than 80% of Blue Corporation.
C) Red owns less than 20% of Blue Corporation.
D) Red owns 80% or more of Blue Corporation.
E) None of the above.

Question 76

During the current year, Kingbird Corporation (a calendar year C corporation) had the following income and expenses: On October 1, Kingbird Corporation made a contribution to a qualified charitable organization of $6,300 in cash (not included in any of the above items). Determine Kingbird's charitable contribution deduction for the current year.

A) $0.
B) $4,230.
C) $4,500.
D) $6,300.
E) None of the above.

Question 77

Orange Corporation owns stock in White Corporation and has net operating income of $400,000 for the year. White Corporation pays Orange a dividend of $60,000. What amount of dividends received deduction may Orange claim if it owns 15% of White stock (assuming Orange's dividends received deduction is not limited by its taxable income)?

A) $9,000.
B) $42,000.
C) $48,000.
D) $60,000.
E) None of the above.

Question 78

Sage, Inc., a closely held corporation that is not a PSC, has a $110,000 passive loss, $90,000 of active income, and $25,000 of portfolio income during the year. How much of the passive loss can Sage deduct in the current year?

A) $0.
B) $25,000.
C) $90,000.
D) $110,000.
E) None of the above.

Question 79

Grocer Services Corporation (a calendar year taxpayer), a wholesale distributor of food, made the following donations to qualified charitable organizations during the year: How much qualifies for the charitable contribution deduction?

A) $15,000.
B) $16,850.
C) $17,250.
D) $19,450.
E) None of the above.

Question 80

Jade Corporation, a C corporation, had $100,000 operating income and $40,000 operating expenses during the year. In addition, Jade had a $2,000 long-term capital gain and a $10,000 short-term capital loss. Compute Jade's taxable income for the year.

A) $52,000.
B) $57,000.
C) $60,000.
D) $62,000.
E) None of the above.