5 On January 15th of the current year, Roger incorporates his sole proprietorship under Section 351 in exchange for 100% of the stock of new corporation. Five days later, Roger is involved in a boating accident. Amber, who happens to see the accident, rescues Roger and saves him from drowning. Roger is so grateful, he gives 25% of the stock in his new corporation to Amber. Based on these facts, Section 351 will not apply to Roger's original incorporation on January 15th because the transfer to Amber means he does not satisfy the 80% control requirement. a. True b. False QUESTION 6 The Lane Corporation distributed a $100,000 cash dividend to its shareholders. This transaction will be reflected on which of the following schedules of Form 1120? a. Schedule M-1. b. Schedule M-2. c. Schedule M-3. d. Both Schedule M-1 and M-2. e. Dividends paid by a corporation to its own shareholders are not reported anywhere on the 1120. QUESTION 7 Heron Corporation is a closely-held corporation and is NOT a personal service corporation. It has $100,000 of net active income, $40,000 of portfolio income, and a $120,000 passive loss during the year. How much of the $120,000 passive loss is deductible in the current year? a. $20,000. b. $120,000 c. $100,000 d. $40,000