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business
federal taxation 2019

Questions and Answers of Federal Taxation 2019

In 2019, Chris sold a painting to Bernie for$40,000. Chris received $10,000 in 2019 and will receive $30,000 in 2020. Chris bought the painting in 2015 for $15,000.Bernie did not pay Chris $30,000
Which of the following is not considered“constructive receipt” of income?a. X was informed its check for services rendered was available on December 20, 2019, but it waited until January 21,
Xeno Corporation purchased supplies from Kimbo Company in 2019. The total invoice was for $20,000, but Xeno claimed that only one-halfo f the order was received and paid only $10,000 in 2019. Both
Bevin Inc. uses the FIFO method for valuing inventory. Its inventory purchases in 2019 totaled $5,000,000 and its ending inventory on December 31, 2019 is $2,000,000(before the Code Sec. 263A cost
X uses the LIFO method in computing its inventory. It had 1,000 units on hand at the end of 2019. Based on the following information, what is the value of its ending inventory on December 31,
Y uses the FIFO method in computing its inventory. On January 1, 2019, its beginning inventory of 3,500 units consisted of the following:During 2019, Y purchased the following units:During 2019, it
Richard sold a rare automobile he had held as an investment in 2018. Richard purchased the automobile in 1993; its adjusted basis at the time of the sale was $70,000, and the selling price was
John sold a painting in February 2019 for$40,000. He received $10,000 in February and was to receive $15,000 in 2020 and 2021, plus interest. He purchased the painting in 2008 for $15,000, and its
John’s basis in the painting in problem 67 is:a. $0b. $25,000c. $30,000d. $39,000e, $42,250problem 67John sold a painting in February 2019 for $40,000. He received $10,000 in February and was to
Bill is a cash basis, calendar-year taxpayer. Which oft he following December items result in gross income or deductions for the current year?a. Check received for December rent,$700, not deposited
Do any of the transactions below qualify for installment reporting? If not, why not?a. Sale of property in December, with payment received in full the following January at a gainb. Sale of property
A manufacturer of pollution control facilities reported its profits on the completed-contract method. To value its raw materials and work in process, the taxpayer used the LIFO method, thus“having
John Smythe has a margin account with Investit Investment Company. The stocks and bonds in the account earned dividends and interest of $10,000 in 2019. The $10,000 was paid directly to the margin
What requirements must be met for stock to qualify as Code Sec. 1244 stock? What are the tax consequences of meeting these requirements?
James, who is single, owns Iper Company stock that became worthless this year. If the stock is Code Sec. 1244 stock then what type of loss does James have for tax purposes?
What is the "built-in loss" rule of Code Sec. 1244? What is the purpose of the rule?
What is the holding period required for gain exclusion on the disposition of Code Sec. 1202 stock?
What limits apply to how much gain on the disposition of Code Sec. 1202 stock is eligible for exclusion from a taxpayer's gross income?
If a shareholder of Code Sec. 1202 stock receives an offer that is too good to refuse to sell her stock after holding the stock for only eight months, is there a possibility for the shareholder to
Rhia Co. began operations this year. Are there restrictions on the tax year it may use?
When is the cash method of accounting not available to corporations?
Are net capital gains and losses treated similarly for individuals and corporations?
What is the special depreciation recapture rule that applies to corporations?
What is the purpose of the dividends-received deduction? What corporations are entitled to claim this deduction? What dividends qualify for this deduction?
Under what circumstances is the dividends- received deduction on a given dividend received not available?
Just Corporation owns 11 percent of Shap Co.'s stock. What is the divdends-received deduction it will use?
What restrictions apply to the dividends- received deduction of dividends received from debt-financed stock purchases?
What happens to the basis of stock on which an "extraordinary" dividend has been received?
What are the main differences between net operating losses of individuals and corporations?
Milroy Inc. had a $250,000 net operating loss (NOL) this year. In which years can Milroy Inc. use this NOL?
In the absence of Code Sec. 248, how would organizational expenditures be treated?
What is the amortization period for organizational expenditures?
How do corporations treat start-up expenditures?
What is the maximum charitable contribution allowance for corporations? Is there a carryover to other years?
What is the corporate contribution base for charitable deductions?
When is the full fair market value deduction not available on a transfer of property to charity?
Describe types of disallowed deductions and losses on related party transactions.
When may it be a tax advantage to incorporate even though the income may be double taxed?
Frumer Inc. is the parent corporation of a parent-subsidiary controlled group. The subsidiaries were acquired this year. It is considering filing a consolidated tax return. What are the advantages
Are all affiliated corporations eligible consolidated returns?
What is a built-in deduction on a consolidated return?
Parent Corporation owns all the stock in Subsidiary Corporation and is on the calendar-year tax year. Subsidiary Corporation has a fiscal year ending on August 31. Are they allowed to file a
Must corporations make estimated tax payments? If so, when?
What are the four general categories of Schedule M-1 adjustments needed to reconcile book income and taxable income?
What is the purpose of the reconciliation of taxable income with book income?
What is the purpose of Schedule UTP?
Sevish Co.'s taxable income is greater than its book income. What is the result of this situation?
Bob, Sam, and Tom formed IU Inc. in 2019.Bob contributed equipment (Code Sec. 1231 property) he acquired in 2016 for $190,000.On the date of transfer, the equipment’s adjusted basis and fair market
Olivia and Tatiana form Jen Co. earlier this year. Olivia contributed services worth $24,000 and property worth $1,000 and Tatiana contributed property worth $25,000. Each received 25 shares of Jen
Assume the same facts in 53 except Olivia received 40 shares and the fair market value of the property she contributed was $16,000. Is the transaction nontaxable under Code Sec. 351?
Michelle Ellis transfers land and inventory to Verve Corporation in return for 100 percent of its stock. The land has a fair market value of $200,000 and an adjusted basis of $90,000. The inventory
Courtney Vile and Kurt Barnett form Radical Inc. Courtney contributes a building that has a fair market value of $150,000 in exchange for 50 shares of Radical worth $50,000. The building has an
Thomas transfers land worth $100,000 with an adjusted basis of $35,000 and a mortgage of $65,000 and equipment worth $30,000 and a basis of $10,000 to Andy Co. in return for 50 shares of stock.
Yager and Boggs formed Y&B Company in the current year. Yager contributed a building with a fair market value of$97,000, a mortgage of $75,000 and an adjusted basis of $50,000 in return for 22 shares
Nate Graves incorporated his cabinetry business and transferred the following assets and liabilities to Storage Inc.What are the tax consequences to Nate and Storage Inc.? Cash Accounts Receivable
Bill decided to incorporate his printing business and to give his manager, Charlie, a share in the business. Bill's sole proprietorship transferred the following to Tom Co.:Bill received 70 shares of
Susan Sweets is a 40 percent shareholder in Acclaim Inc., a theatrical supplies company.She transfers a fully depreciated car with a value of $12,000 to the corporation, but does not receive any
The municipality of Viewpoint, Kansas, wishes to attract local businesses. As part of a master development program that was approved by the city council, it donated a building with a basis of $50,000
In each of the following situations, determine if there is any depreciation or general business credit recapture.a. Joe incorporates his sole proprietorship and subsequently gifts the stock to his
Gary and Tom own 100 shares of Rosa Co.stock. Gary acquired the stock for $60,000 from Rosa Co. three years ago when it was formed. Tom acquired the stock two years ago from Julie for $$45,000. Gary
In 2017, Susan Christian transferred a machine with a fair market value of $30,000 and an adjusted basis of $40,000 to JPC Corporation in return for 60 shares of stock. The stock qualified as Code
Niffy Corporation, a domestic C corporation, issued 100 shares of Code Sec. 1202 stock on November 1, 2014, to Jennifer in exchange for $5,000. This was the first time it issued such stock. Jennifer
On September 1, 2014 Tina West transferred property worth $150,000 to Macum Corporation, a qualified small business corporation for Code Sec. 1202 purposes, in exchange for stock. The property had a
A corporation has income of $80,000 from operations, a $12,000 short-term capital gain, and a $16,000 long-term capital loss. What is the corporation's taxable income for the year?
Baginski Corporation purchased a residential building and depreciated it using straightline depreciation. Determine the amount of ordinary income and Code Sec. 1231 income to be recognized assuming:
Cablephones Inc., which is not a member of an affiliated group, had gross income from operations of $390,000 and deductible expenses of $475,000. Dividends of$300,000 were received from more than 20
What is the dividends-received deduction allowed a corporation that receives $170,000 in dividends from a 45 percent owned domestic corporation if 37 percent of the cost of the investment is borrowed
McIntyre Corporation purchases 1,000 shares of a 10 percent owned domestic corporation at $100 per share. McIntyre receives a $25. per share dividend within the first year after the purchase. What is
Bevin Inc. had the following in 2019:a. What is Bevin Inc.’s taxable income in 2019?b. What carrybacks or carryovers does it have from 2019? Gross income from operation Dividends from 22%-owned
Susco had the following items this year:What is Susco’s taxable income and does it have any carrybacks/carryovers? Gross receipts Operating expenses Long-term capital gain Long-term capital loss
Caskets Inc. was incorporated on June 1, but did not start business until September 1. It adopted a fiscal year ending March 31, coinciding with the end of its natural business cycle. In connection
Ludlow Corporation has excess inventory that it no longer wants. In order to clear out its warehouse to make room for shipments of new inventory, it has decided to donate the inventory (bedding
Donor Corporation had the following income and deductions for last year:Donor Corporation also made contributions (not included above) to qualifying charitable organizations of $175,000. Determine
Barbara sells an asset to her wholly-owned corporation. The asset has a basis of $32,000 and a fair market value at the time of the sale of $27,000. What is the corporation's recognized gain or loss
On April 4 of this year, Mexco sold stock it held as an investment. It had a $300,000 short-term capital loss on the sale. It also sold a building, equipment, and the land under the building on July
Red Paint Corporation generated $100,000 of taxable income from operations last year, plus a $70,000 gain from the sale of land used as a parking lot for six years. What is the amount of federal
A & G Drug Store Inc. has been in operation for six years. The first four years it accumulated operating loss carryovers of $65,000. The fifth year it earned $25,000 in operating income and had
The matrix below shows the stock ownership in four corporations by four unrelated individuals:Which of the above corporations, if any, are members of a brother-sister controlled group? Explain why
Tiller Corporation’s net income per books(after taxes) was $68,450. During the year, it had the following transactions:Determine Tiller Corporation's taxable income assuming it does not have an NOL
Crates Corporation's financial income before income taxes for the year was $250,000.Organization costs of $90,000 are being written off over a 10-year period for financial statement purposes. For tax
Cybele formed a corporation and transferred a building with a basis of $50,000, subject to a $70,000 mortgage, and cash of $15,000 to it for stock. Cybele’s basis in her stock and the
The following statements about the dividends received deduction are true, except:a. The stock on which dividends are received must be held for at least 46 days.b. The deduction is not available if
Excluding extensions, which one of the following Form 1120 tax returns is filed late? a. b. c. d. Tax Year Ended January 31, 2018 August 31, 2017 July 31, 2017 December 31, 2018 Date Filed May 15,
Jones transferred $15,000 cash and a building with an adjusted basis of $50,000 and a fair market value of $90,000 to Malibu Gardens Corporation in return for 90 percent of its only class of stock.
Sally transferred a building with an adjusted basis of $40,000 and a fair market value of$45,000 to Sandy Corporation. In exchange, she received the following: 1. 80 percent of Sandy Corporation's
Indo Corporation was organized on January 4, 2019, and began active business on January 5, 2019. Indo incurred the following expenses in connection with creating its business.What is the maximum
Sinco Company had $300,000 of income from business operations and $700,000 of allowable expenses. It also received $20,000 in dividends from a domestic corporation in which it owns 22 percent of the
Jones is a sole proprietorship. He would like to be taxed as a corporation for federal tax purposes. Jones may become a corporation by:a. Filing a corporate return for this yearb. Timely filing Form
XYZ is a corporation. It needs to raise some capital and is uncertain whether to issue debt or equity. Which of the following statements is true?a. Both interest payments and dividend payments are
In the year of formation, a corporation:a. May elect a tax period other than those ofi ts major shareholdersb. Must elect the same tax period as its major shareholdersc. Must use the cash basis for
Smith Co. sells a machine during the year for$100,000. Smith acquired the machine for$140,000. At the time ofs ale, the machine's adjusted basis was $47,200. Smith Co.'s recognized gain on the sale
Bevco incurred start-up expenditures while investigating the acquisition of a business.With respect to such expenditures, Bevco:a. Can expense them in the year incurredb. Must capitalize them and
Which of the following corporate groups may file a consolidated tax return?a. Brother-sister groupb. Parent-subsidiary groupc. Both brother-sister and parent-subsidiary groupsd. None of the above
Shock Inc. has several uncertain tax positions this year. It should do which of the following:a. Determine if the probability of the position being sustained upon IRS challenge is greater than 50%.b.
A, B and V Corporations each have only one class of stock outstanding. The ownership of the stock is as follows:Are any oft he corporations part of a brother siser controlled group for Code Sec. 1561
Tatco’s pretax book income and taxable income differ because of one item, warranty expense. Tatco reports a $200,000 warranty expense and a related estimated liability for warranties for
Last year, Intrepid Corporation's tax return revealed the following items:a. What is Intrepid’s dividends-received deduction?b, What is the charitable contribution deduction?c. What is the taxable
Mr. Trent transferred three apartment buildings to a new corporation in exchange for all its stock.The facts pertaining to the buildings were:a. What gains are realized and recognized on each
Jones, Able, and Smith want to form Shriver Corporation. They want to accomplish this in the most tax efficient(least costly) way possible. They have asked for advice. The counselor will receive
Cambo Corporation, a calendar-year taxpayer, was formed in 2016 and incurred $60,000 in organizational expenditures.Had the corporation made a proper election under Code Sec. 248, it would have been

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