Question 1

Corporate distributions to shareholders are always dividends.

Accepted Answer

Corporate distributions to shareholders can take the form of dividends, but they can also be in the form of stock buybacks or capital distributions.

Question 2

A corporation may elect to become a Subchapter S corporation only at the time it is initially formed.

Accepted Answer

A corporation can elect to become a Subchapter S corporation at any time, not just at the time of formation. However, there are certain requirements that must be met in order to qualify for S corporation status.

Question 3

In 2014,the first year of its existence,Chartreuse Corporation had a net capital loss of $3,000.In 2015 and 2016,it had net capital gains of $5,000 and $8,000,respectively.In 2017,the company reported a net capital loss of $12,000.What is the amount of capital loss carryforward to 2018?

Accepted Answer

To calculate the capital loss carryforward, we need to add up the net capital gains and losses from previous years.

- In 2014, the net capital loss was $3,000. 
- In 2015 and 2016, the net capital gains were $5,000 and $8,000, respectively. 
- In 2017, the net capital loss was $12,000.

To calculate the capital loss carryforward to 2018, we need to subtract the total net capital gains from the total net capital losses:

$3,000 (loss in 2014) + $5,000 (gain in 2015) + $8,000 (gain in 2016) + $12,000 (loss in 2017) = $4,000 (total net capital loss)

Since the total net capital loss is positive, the capital loss carryforward to 2018 is $2,000 (half of the total net capital loss). Therefore, the correct answer is (C) ($2,000).

Question 4

Which of the following statements is correct?

Accepted Answer

According to the tax laws, a net capital loss can be carried back three years and then forward five years. This means that if a corporation incurs a loss due to the sale of capital assets, it can offset taxes on gains made in the previous three years and also carry forward any unused losses for the next five years.

Option A is incorrect. A net operating loss can be carried back two years and forward twenty years according to the current tax laws.

Option C is also incorrect. The first estimated payment of a corporation is due on the 15th day of the fourth, sixth, ninth, and twelfth months of the fiscal year.

Option D is incorrect. A corporation is entitled to a charitable deduction of up to 10% of its taxable income rather than gross income before certain items.

Question 5

A shareholder of a Subchapter S corporation is required to personally report his or her proportionate share of corporate net income.

Accepted Answer

Subchapter S corporations are pass-through entities, meaning that the profits and losses of the corporation pass through to the shareholders who report them on their personal tax returns. Shareholders are required to report their proportionate share of corporate net income, whether or not the corporation actually distributes that income to them.

Question 6

Heather and Howie form HH Company.In exchange for 50% of the stock,Heather contributes cash of $7,000.For the remaining 50%,Howie contributes a truck with a FMV of $7,000 (basis of $10,000).Which of the following statements is correct?

Accepted Answer

Howie's basis in his stock is $10,000, which is the basis of the truck he contributed.

Question 7

A corporation must file Form 1120 2½ months after the end of its fiscal year.

Accepted Answer

A corporation must file Form 1120 by the 15th day of the fourth month after the end of its fiscal year.

Question 8

Andre formed a corporation and owns all the stock.He contributed property with a FMV of $10,000 and a basis of $7,000 and he received $1,000 cash from the corporation.Andre's basis in his stock is:

Accepted Answer

Andre's basis in his stock is equal to the basis of the property he contributed, which is $7,000.

Question 9

Which of the following statements is incorrect?

Accepted Answer

A calendar year corporation must file its tax return by April 15 of the following year, not March 15.

Question 10

A corporation can elect to be taxed as a Subchapter S corporation if it meets certain requirements including that it has 100 or fewer shareholders,all of whom are individuals,estates,and certain trusts.

Accepted Answer

This statement is true. In order to qualify for Subchapter S status, a corporation must meet several requirements, including the 100 or fewer shareholder rule. Additionally, those shareholders must be individuals, estates, or certain trusts- not other corporations or partnerships.

Question 11

If a shareholder receives cash from a corporation in complete liquidation of his or her ownership interest and the cash received is less than the shareholder's basis in the stock,the shareholder will report a loss.

Accepted Answer

If a shareholder receives cash from a corporation in complete liquidation of his or her ownership interest and the cash received is less than the shareholder's basis in the stock, the shareholder will report a loss. This loss is treated as a capital loss, which can be used to offset capital gains or up to $3,000 of ordinary income.

Question 12

Initially,corporations with average annual gross receipts for the last three years of $5 million or less are not subject to the corporate AMT rules.

Accepted Answer

This statement is true according to the current tax laws. Corporations with average annual gross receipts of $5 million or less are exempt from the corporate AMT rules. However, it's important to note that tax laws can change over time, so this may not always be the case in the future.

Question 13

Felix transfers land with a FMV of $900,000 to a newly formed corporation in exchange for all the stock.The land has a basis of $300,000 and debt of $500,000.The basis of the land,in the hands of the corporation is:

Accepted Answer

The answer of Felix transfers land with a FMV of...

Question 14

Schedule L is a reconciliation of net income per books to net income per the tax law.

Accepted Answer

The answer of Schedule L is a reconciliation of net...

Question 15

A C corporation has a fiscal year-end of August 30.It requests an automatic extension of time to file its income tax return.It must file its return no later than the 15^th day of:

Accepted Answer

The answer of A C corporation has a fiscal year-end...

Question 16

Basira transfers land with a FMV of $900,000 to a newly formed corporation in exchange for all the stock.The land has a basis of $500,000 and debt of $300,000.Basira's taxable gain from this transaction is:

Accepted Answer

Basira's taxable gain is $0 because under Section 351 of the Internal Revenue Code, no gain or loss is recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation, and immediately after the exchange, such person or persons are in control (meaning ownership of at least 80% of both the stock and voting power) of the corporation. In this case, Basira transfers land to the corporation in exchange for all of its stock, meeting these conditions. The debt relief of $300,000 is not considered taxable gain in this context.

Question 17

A C corporation has a fiscal year-end of November 30.It does not request an extension of time to file its income tax return.It must file its return no later than the 15^th day of:

Accepted Answer

C corporations are required to file their income tax returns by the 15th day of the fourth month following the end of their fiscal year. For a fiscal year ending on November 30, the fourth month after is March, making March 15 the deadline.

Question 18

A corporation can deduct a charitable contribution of up to 50% of its adjusted gross income.

Accepted Answer

A corporation can deduct charitable contributions up to 10% of its taxable income, not 50%.

Question 19

Andre formed a corporation and owns all the stock.He contributed property with a FMV of $10,000 and a basis of $7,000 and he received $1,000 cash from the corporation.Andre's taxable gain is:

Accepted Answer

The answer of Andre formed a corporation and owns all...

Question 20

Schedule M-1 reconciles from net income per books to net income per the tax law.

Accepted Answer

Schedule M-1 is used to reconcile net income per books with net income per the tax law for a corporation. It shows the adjustments made to taxable income to arrive at book income, as well as adjustments made to book income to arrive at taxable income.

Quiz 15: Corporate Taxation

Corporate distributions to shareholders are always dividends.

A corporation may elect to become a Subchapter S corporation only at the time it is initially formed.

In 2014,the first year of its existence,Chartreuse Corporation had a net capital loss of $3,000.In 2015 and 2016,it had net capital gains of $5,000 and $8,000,respectively.In 2017,the company reported a net capital loss of $12,000.What is the amount of capital loss carryforward to 2018?

Which of the following statements is correct?

A shareholder of a Subchapter S corporation is required to personally report his or her proportionate share of corporate net income.

Heather and Howie form HH Company.In exchange for 50% of the stock,Heather contributes cash of $7,000.For the remaining 50%,Howie contributes a truck with a FMV of $7,000 (basis of $10,000) .Which of the following statements is correct?

A corporation must file Form 1120 2½ months after the end of its fiscal year.

Andre formed a corporation and owns all the stock.He contributed property with a FMV of $10,000 and a basis of $7,000 and he received $1,000 cash from the corporation.Andre's basis in his stock is:

Which of the following statements is incorrect?

A corporation can elect to be taxed as a Subchapter S corporation if it meets certain requirements including that it has 100 or fewer shareholders,all of whom are individuals,estates,and certain trusts.

If a shareholder receives cash from a corporation in complete liquidation of his or her ownership interest and the cash received is less than the shareholder's basis in the stock,the shareholder will report a loss.

Initially,corporations with average annual gross receipts for the last three years of $5 million or less are not subject to the corporate AMT rules.

Felix transfers land with a FMV of $900,000 to a newly formed corporation in exchange for all the stock.The land has a basis of $300,000 and debt of $500,000.The basis of the land,in the hands of the corporation is:

Schedule L is a reconciliation of net income per books to net income per the tax law.

A C corporation has a fiscal year-end of August 30.It requests an automatic extension of time to file its income tax return.It must file its return no later than the 15^th day of:

Basira transfers land with a FMV of $900,000 to a newly formed corporation in exchange for all the stock.The land has a basis of $500,000 and debt of $300,000.Basira's taxable gain from this transaction is:

A C corporation has a fiscal year-end of November 30.It does not request an extension of time to file its income tax return.It must file its return no later than the 15^th day of:

A corporation can deduct a charitable contribution of up to 50% of its adjusted gross income.

Andre formed a corporation and owns all the stock.He contributed property with a FMV of $10,000 and a basis of $7,000 and he received $1,000 cash from the corporation.Andre's taxable gain is:

Schedule M-1 reconciles from net income per books to net income per the tax law.

Quiz 15: Corporate Taxation

Corporate distributions to shareholders are always dividends.

A corporation may elect to become a Subchapter S corporation only at the time it is initially formed.

In 2014,the first year of its existence,Chartreuse Corporation had a net capital loss of $3,000.In 2015 and 2016,it had net capital gains of $5,000 and $8,000,respectively.In 2017,the company reported a net capital loss of $12,000.What is the amount of capital loss carryforward to 2018?

Which of the following statements is correct?

A shareholder of a Subchapter S corporation is required to personally report his or her proportionate share of corporate net income.

Heather and Howie form HH Company.In exchange for 50% of the stock,Heather contributes cash of $7,000.For the remaining 50%,Howie contributes a truck with a FMV of $7,000 (basis of $10,000) .Which of the following statements is correct?

A corporation must file Form 1120 2½ months after the end of its fiscal year.

Andre formed a corporation and owns all the stock.He contributed property with a FMV of $10,000 and a basis of $7,000 and he received $1,000 cash from the corporation.Andre's basis in his stock is:

Which of the following statements is incorrect?

A corporation can elect to be taxed as a Subchapter S corporation if it meets certain requirements including that it has 100 or fewer shareholders,all of whom are individuals,estates,and certain trusts.

If a shareholder receives cash from a corporation in complete liquidation of his or her ownership interest and the cash received is less than the shareholder's basis in the stock,the shareholder will report a loss.

Initially,corporations with average annual gross receipts for the last three years of $5 million or less are not subject to the corporate AMT rules.

Felix transfers land with a FMV of $900,000 to a newly formed corporation in exchange for all the stock.The land has a basis of $300,000 and debt of $500,000.The basis of the land,in the hands of the corporation is:

Schedule L is a reconciliation of net income per books to net income per the tax law.

A C corporation has a fiscal year-end of August 30.It requests an automatic extension of time to file its income tax return.It must file its return no later than the 15th day of:

Basira transfers land with a FMV of $900,000 to a newly formed corporation in exchange for all the stock.The land has a basis of $500,000 and debt of $300,000.Basira's taxable gain from this transaction is:

A C corporation has a fiscal year-end of November 30.It does not request an extension of time to file its income tax return.It must file its return no later than the 15th day of:

A corporation can deduct a charitable contribution of up to 50% of its adjusted gross income.

Andre formed a corporation and owns all the stock.He contributed property with a FMV of $10,000 and a basis of $7,000 and he received $1,000 cash from the corporation.Andre's taxable gain is:

Schedule M-1 reconciles from net income per books to net income per the tax law.

A C corporation has a fiscal year-end of August 30.It requests an automatic extension of time to file its income tax return.It must file its return no later than the 15^th day of:

A C corporation has a fiscal year-end of November 30.It does not request an extension of time to file its income tax return.It must file its return no later than the 15^th day of: