devry acct 424 week 8 final exam 496796

1.(TCO 1) Hunter and Warren form Tan Corporation. Hunter transfers equipment (basis of $210,000 and fair market value of $180,000), and Warren transfers land (basis of $15,000 and fair market value of $150,000) and $30,000 cash. Each receives 50% of Tan’s stock. Which happens as a result of these transfers (Points : 5)

2.(TCO 1) Samantha transferred land worth $200,000 (basis of $40,000) to Lava Corporation, an existing entity, for 300 shares of its stock. Lava Corporation has two other shareholders, Timothy and Brett, each of whom holds 50 shares. Which happens with respect to the transfer (Points : 5)

3.(TCO 2) Pelican Inc., a closely held corporation (not a PSC), has a $350,000 loss from a passive activity, $135,000 of active income, and $160,000 of portfolio income. How much is Pelican’s taxable income (Points : 5)

4.(TCO 2) Silver Corporation has average gross receipts of $5.7 million, $4.6 million, and $4.8 million for the last three years, respectively. Silver is _____. (Points : 5)

5.(TCO 3) As of January 1, Everest Corporation has a deficit in accumulated E & P of $75,000. For tax year, current E & P (all of which accrued ratably) is $40,000 (prior to any distribution). On July 1, Everest Corporation distributes $60,000 to its sole, noncorporate shareholder. Which is the amount of the distribution that is a dividend (Points : 5)

6.(TCO 3) Parrot Corporation has accumulated E & P of $40,000 on January 1, 20×1. In 20×1, Parrot has current E & P of $45,000 (before any distribution). On December 31, 20×1, the corporation distributes $120,000 to its sole shareholder, Michael (an individual). Which is Parrot Corporation’s E & P as of January 1, 20×2 (Points : 5)

7.(TCO 4) Cardinal Corporation has 1,000 shares of common stock outstanding. John owns 300 of the shares, John’s grandfather owns 200 shares, John’s daughter owns 300 shares, and Redbird Corporation owns 200 shares. John owns 60% of the stock in Redbird Corporation. How many shares is John deemed to own in Cardinal Corporation under the attribution rules of 318 (Points : 5)

8.(TCO 5) Francis exchanges her 20% interest in Beryl Corporation for 10,000 shares of Pyrite Corporation (value $200,000) and $40,000 cash. Francis’s basis in her Beryl stock is $95,000. The accumulated earnings of Beryl are $325,000, and the accumulated earnings of Pyrite are $225,000 at the time of the reorganization. How does Francis treat this transaction for tax purposes (Points : 5)

9.(TCO 6) How are the members of a consolidated group affected by computations related to E & P (Points : 5)

10.(TCO 11) Which statement, if any, does not reflect the rules governing the negligence accuracy-related penalty?(Points : 5)

Rachel has a $160,000 tax basis for her partnership interest.

The partnership has an $80,000 adjusted basis in the property contributed by Rachel.

Rachel recognizes a $30,000 loss on her property transfer.

Julio has a $120,000 tax basis for his partnership interest.

None of the above

$135,000

$225,000

$240,000

$315,000

None of the above

$110,000

$146,000

$144,000

$196,000

None of the above

Nutt recognizes a $1,000 LTCG.

Nutt’s stock basis will be $2,000.

Nutt’s ordinary income is $15,000.

Nutt’s return of capital is $11,000.

None of the above

There is no advantage also to elect 1244 stock.

An S corporation can own 85% of an insurance company.

An estate may be a shareholder.

A voting trust arrangement is not available.

None of the above

Depletion in excess of basis of property

Illegal kickbacks

Nontaxable income

Sales

None of the above