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Corporate Taxation

Corporate Taxation MCQs

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Alan, Baker, and Carr formed Dexter Corporation during 2013. Pursuant to the incorporation agreement, Alan transferred property with an adjusted bas...

$0
$30,000
$45,000
$65,000

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Jones incorporated a sole proprietorship by exchanging all the proprietorship’s assets for the stock of Nu Co., a new corporation. To qualify for ...

50.00%
51.00%
66.67%
80.00%

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Feld, the sole stockholder of Maki Corp., paid $50,000 for Maki’s stock in 2007. In 2013, Feld contributed a parcel of land to Maki but was not gi...

$50,000
$52,000
$60,000
$68,000

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Rela Associates, a partnership, transferred all of its assets, with a basis of $300,000, along with liabilities of $50,000, to a newly formed corpor...

No gain or loss on the transfer of its assets nor on the assumption of Rela’s liabilities by the corporation.
Gain on the assumption of Rela’s liabilities by the corporation.
Gain or loss on the transfer of its assets to the corporation.
Gain, but not loss, on the transfer of its assets to the corporation.

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Roberta Warner and Sally Rogers formed the Acme Corporation on October 1, 2012. On the same date Warner paid $75,000 cash to Acme for 750 shares of ...

$0 $0
$0 $10,000
$10,000 $0
$10,000 $10,000

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Jackson, a single individual, inherited Bean Corp. common stock from Jackson’s parents. Bean is a qualified small business corporation under Code ...

$0
$ 3,000
$20,000
$25,000

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Which of the following is not a requirement for stock to qualify as Sec. 1244 small business corporation stock?

The stock must be issued to an individual or to a partnership.
The stock was issued for money or property (other than stock and securities).
The stock must be common stock.
The issuer must be a domestic corporation.

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During the current year, Dinah sold Sec. 1244 small business corporation stock that she owned for a loss of $125,000. Assuming Dinah is married and ...

$125,000 capital loss.
$25,000 capital loss; $100,000 ordinary loss.
$75,000 capital loss; $50,000 ordinary loss.
$0 capital loss; $125,000 ordinary loss

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Nancy, who is single, formed a corporation during 2007 using a tax-free asset transfer that qualified under Sec. 351. She transferred property havin...

$0 ordinary loss; $45,000 capital loss.
$25,000 ordinary loss; $10,000 capital loss.
$25,000 ordinary loss; $20,000 capital loss.
$45,000 ordinary loss; $0 capital loss.

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A civil fraud penalty can be imposed on a corporation that underpays tax by

Omitting income as a result of inadequate recordkeeping.
Failing to report income it erroneously considered not to be part of corporate profits.
Filing an incomplete return with an appended statement, making clear that the return is incomplete.
Maintaining false records and reporting fictitious transactions to minimize corporate tax liability.

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Bass Corp., a calendar-year C corporation, made qualifying 2012 estimated tax deposits based on its actual 2011 tax liability. On March 15, 2013, Ba...

I only.
II only.
Both I and II.
Neither I nor II.

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Edge Corp., a calendar-year C corporation, had a net operating loss and zero tax liability for its 2012 tax year. To avoid the penalty for underpaym...

Yes Yes
Yes No
No Yes
No No

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A corporation’s tax year can be reopened after all statutes of limitations have expired if I. The tax return has a 50% nonfraudulent omission from...

I only.
II only.
Both I and II.
Neither I nor II.

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A corporation’s penalty for underpaying federal estimated taxes is

Not deductible.
Fully deductible in the year paid.
Fully deductible if reasonable cause can be established for the underpayment.
Partially deductible.

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Blink Corp., an accrual-basis calendar-year corporation, carried back a net operating loss for the tax year ended December 31, 2012. Blink’s gross...

I only.
Both I and II.
II only.
Neither I nor II.

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When computing a corporationâ€™s income tax expense for estimated income tax purposes, which of the following should be taken into account? Co...

No No
No Yes
Yes No
Yes Yes

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Finbury Corporation’s taxable income for the year ended December 31, 2012, was $2,000,000 on which its tax liability was $680,000. In order for Fi...

90% of the 2013 tax liability.
93% of the 2013 tax liability.
100% of the 2013 tax liability.
The 2012 tax liability of $680,000.

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Green Corp. was incorporated and began business in 2010. In computing its alternative minimum tax for 2011, it determined that it had adjusted curre...

$ 75,000
$ (75,000)
$(100,000)
$(150,000)

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Eastern Corp., a calendar-year corporation, was formed during 2011. On January 3, 2012, Eastern placed five-year property in service. The property w...

$306,000
$305,000
$304,000
$301,000

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If a corporation’s tentative minimum tax exceeds the regular tax, the excess amount is

Carried back to the first preceding taxable year.
Carried back to the third preceding taxable year.
Payable in addition to the regular tax.
Subtracted from the regular tax.

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Rona Corp.â€™s 2012 alternative minimum taxable income was $200,000. The exempt portion of Ronaâ€™s 2012 alternative minimum taxable incom...

$0
$12,500
$27,500
$52,500

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A corporationâ€™s tax preference items that must be taken into account for 2013 alternative minimum tax purposes include

Use of the percentage-of-completion method of accounting for long-term contracts.
Casualty losses.
Tax-exempt interest on private activity bonds issued in 2008.
Capital gains.

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In computing its 2013 alternative minimum tax, a corporation must include as an adjustment

The dividends received deduction.
The difference between regular tax depreciation and straight-line depreciation over forty years for real property placed in service in 1998.
Charitable contributions.
Interest expense on investment property.

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A corporation will not be subject to the alternative minimum tax for calendar year 2013 if

The corporation’s net assets do not exceed $7.5 million.
The corporation’s average annual gross receipts do not exceed $10 million.
The corporation has less than ten shareholders.
2013 is the corporation’s first tax year.

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Bradbury Corp., a calendar-year corporation, was formed on January 2, 2009, and had gross receipts for its first four taxable years as follows: Yea...

2010
2011
2012
Bradbury is exempt from AMT for its first four taxable years.

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Which of the following entities must include in gross income 100% of dividends received from unrelated taxable domestic corporations in computing re...

Yes Yes
No No
Yes No
No Yes

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Andi Corp. issued $1,000,000 face amount of bonds in 2004 and established a sinking fund to pay the debt at maturity. The bondholders appointed an i...

$0
$ 8,000
$60,000
$68,000

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The following information pertains to treasury stock sold by Lee Corp. to an unrelated broker in 2013: Proceeds received $50,000 Cost 30,000 Par v...

$0
$ 8,000
$20,000
$30,500

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During 2013, Ral Corp. exchanged 5,000 shares of its own $10 par common stock for land with a fair market value of $75,000. As a result of this exch...

$25,000 Section 1245 gain.
$25,000 Section 1231 gain.
$25,000 ordinary income.
No gain.

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If an S corporation has no accumulated earnings and profits, the amount distributed to a shareholder

Must be returned to the S corporation.
Increases the shareholder’s basis for the stock.
Decreases the shareholder’s basis for the stock.
Has no effect on the shareholder’s basis for the stock.

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A corporation that has been an S corporation from its inception may Have both passive and nonpassive income Be owned by a bankruptcy estate

No Yes
Yes No
No No
Yes Yes

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Bern Corp., an S corporation, had an ordinary loss of $36,600 for the year ended December 31, 2012. At January 1, 2012, Meyer owned 50% of Bern’s ...

$0
$ 2,000
$ 4,000
$18,300

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A calendar-year corporation whose status as an S corporation was terminated during 2012 must wait how many years before making a new S election, in ...

Can make a new S election for calendar year 2013.
Must wait three years.
Must wait five years.
Must wait six years.

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Which one of the following will render a corporation ineligible for S corporation status?

One of the stockholders is a decedent’s estate.
One of the stockholders is a bankruptcy estate.
The corporation has both voting and nonvoting common stock issued and outstanding.
The corporation has 110 stockholders.

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With regard to S corporations and their stockholders, the “at risk” rules applicable to losses

Depend on the type of income reported by the S corporation.
Are subject to the elections made by the S corporation’s stockholders.
Take into consideration the S corporation’s ratio of debt to equity.
Apply at the shareholder level rather than at the corporate level.

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An S corporation may deduct

Foreign income taxes.
A net Section 1231 loss.
Investment interest expense.
The amortization of organizational expenditures.

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An S corporation’s accumulated adjustments account, which measures the amount of earnings that may be distributed tax-free

Must be adjusted downward for the full amount of federal income taxes attributable to any taxable year in which the corporation was a C corporation.
Must be adjusted upward for the full amount of federal income taxes attributable to any taxable year in which the corporation was a C corporation.
Must be adjusted upward or downward for only the federal income taxes affected by capital gains or losses, respectively, for any taxable year in which the corporation was a C corporation.
Is not adjusted for federal income taxes attributable to a taxable year in which the corporation was a C corporation.

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If a calendar-year S corporation does not request an automatic six-month extension of time to file its income tax return, the return is due by

January 31.
March 15.
April 15.
June 30.

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An S corporation is not permitted to take a deduction for

Compensation of officers.
Interest paid to individuals who are not stockholders of the S corporation.
Charitable contributions.
Employee benefit programs established for individuals who are not stockholders of the S corporation.

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An S corporation may

Have both common and preferred stock outstanding.
Have a partnership as a shareholder.
Have a nonresident alien as a shareholder.
Have as many as 100 shareholders.

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Which of the following is not a requirement for a corporation to elect S corporation status (Subchapter S)?

Must be a member of a controlled group.
Must confine stockholders to individuals, estates, and certain qualifying trusts.
Must be a domestic corporation.
Must have only one class of stock.

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Brooke, Inc., an S corporation, was organized on January 2, 2012, with two equal stockholders who materially participate in the S corporation’s bu...

$ 5,000
$20,000
$45,000
$50,000

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Jaxson Corp. has 200,000 shares of voting common stock issued and outstanding. King Corp. has decided to acquire 90% of Jaxson’s voting common sto...

King must acquire 100% of Jaxson stock for the transaction to be a tax-free reorganization.
The transaction will qualify as a tax-free reorganization.
King must issue at least 60% of its voting common stock for the transaction to qualify as a tax-free reorganization.
Jaxson must surrender assets for the transaction to qualify as a tax-free reorganization.

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Ace Corp. and Bate Corp. combine in a qualifying reorganization and form Carr Corp., the only surviving corporation. This reorganization is tax-free...

Yes Yes
Yes No
No Yes
No No

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In a type B reorganization, as defined by the Internal Revenue Code, the I. Stock of the target corporation is acquired solely for the voting stock...

I only
II only.
Both I and II.
Neither I nor II.

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Pursuant to a plan of corporate reorganization adopted in July 2012, Gow exchanged 500 shares of Lad Corp. common stock that he had bought in Januar...

$1,000 long-term capital gain.
$1,000 short-term capital gain.
$1,000 ordinary income.
$0

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Which one of the following is a corporate reorganization as defined in the Internal Revenue Code?

Mere change in place of organization of one corporation.
Stock redemption.
Change in depreciation method from accelerated to straight-line.
Change in inventory costing method from FIFO to LIFO.

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With regard to corporate reorganizations, which one of the following statements is correct?

A mere change in identity, form, or place of organization of one corporation does not qualify as a reorganization.
The reorganization provisions cannot be used to provide tax-free treatment for corporate transactions.
Securities in corporations not parties to a reorganization are always “boot.”
A “party to the reorganization” does not include the consolidated company.

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Which one of the following is not a corporate reorganization as defined in the Internal Revenue Code?

Stock redemption.
Recapitalization.
Mere change in identity.
Statutory merger.

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Claudio Corporation and Stellar Corporation both report on a calendar-year basis. Claudio merged into Stellar on June 30, 2012. Claudio had an allow...

$ 22,623
$ 45,000
$180,000
$180,984

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In 2009, Celia Mueller bought a $1,000 bond issued by Disco Corporation for $1,100. Instead of paying off the bondholders in cash, Disco issued 100 ...

$0.
$400 dividend.
$400 long-term capital gain.
$500 long-term capital gain.

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On April 1, 2012, in connection with a recapitalization of Oakbrook Corporation, Mary Roberts exchanged 500 shares that cost her $95,000 for 1,000 s...

$0
$ 6,500
$10,000
$10,500

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