For the current taxable year, HIJ Inc. had gross receipts from operations of $230,000, operating and other expenses of $310,000, and $120,000 of dividends that it received from a 45 percent-owned domestic corporation. For the current taxable year, HIJ Inc. has taxable income or a net operating loss of what amount?

A. $8,000 taxable income.

B. $40,000 taxable income.

C. $56,000 net operating loss.

D. $80,000 net operating loss.

For the current taxable year, RST Inc.s gross income from operations was $1,000,000 and its expenses from operations were $1,500,000. RST Inc. also received a $600,000 dividend from a 10 percent-owned corporation. How much is RST Inc.s dividends-received deduction?

A. 0.

B. $70,000.

C. $320,000.

D. $420,000.

Bob created MNO Inc. several years ago and has owned all 10 outstanding shares of MNO Inc. since the creation of MNO Inc. The fair market value of those shares is now $50,000. Bobs friend, Lee, owns a building having a fair market value of $80,000 and an adjusted basis to Lee of $20,000. The building is encumbered by a $30,000 mortgage. Earlier this month, Bob and Lee discussed Lees becoming involved in the business of MNO Inc., and as a result of these discussions, Lee transferred the building to MNO Inc. and in exchange for the building, MNO Inc. transferred to Lee 10 shares of authorized but not previously issued stock of MNO Inc. After the transaction there were 20 shares of stock issued and outstanding. How much gain was realized and recognized by Lee as a result of this transaction?

A. $30,000 of gain was realized and recognized.

B. $30,000 of gain was realized,0 of which was recognized.

C. $60,000 of gain was realized, $10,000 of which was recognized.

D. $60,000 of gain was realized and recognized.

Fact Pattern for Questions 11 and 12: Sandra owned a rental apartment building in her sole name for four years. After her business advisors suggested that she conduct her rental activity in corporate form, she promptly transferred the apartment building to ABC Rental Corporation, a newly formed corporation. Sandra received all of the stock of ABC Rental Corporation in exchange for the apartment building. At the time of the transfer of the apartment building to ABC Rental Corporation, Sandras adjusted basis in the building was $50,000, the fair market value of the building was $150,000, the building was subject to a mortgage of $70,000 which ABC Rental Corporation assumed, and there was depreciation recapture potential of $12,000. Sandra received stock of ABC Rental Corporation worth $80,000. As a result of the transaction, how much gain was recognized by Sandra and what was the character of the gain?

A. 0 gain.

B. $12,000 gain, all of which was ordinary income.

C. $20,000 gain, at least $12,000 of which was ordinary income.

D. $30,000 gain, at least $12,000 of which was ordinary income.

BIG Inc. distributed land to an individual shareholder in a nonliquidating distribution. On the date the land was distributed, BIG Inc.s adjusted basis in the land was $20,000, the fair market value of the land was $75,000, and the land was encumbered by a $35,000 mortgage, which liability was assumed by the shareholder. The corporations earnings and profits were $300,000 on the last day of the year in which the distribution was made after taking into effect any impact of the distribution on the corporations earnings and profits. As a result of the distribution, how much is the amount of dividend income to the shareholder, and what is the shareholders basis in the distributed property?

A. Dividend income of $20,000 and basis of $20,000.

B. Dividend income of $40,000 and basis of $20,000.

C. Dividend income of $40,000 and basis of $40,000.

D. Dividend income of $40,000 and basis of $75,000.

Helen, Greg, and Wanda own the stock in HGW Corporation with earnings and profits of $900,000 as follows: Helen, 600 shares; Greg, 400 shares; and Wanda, 1,000 shares. Greg is Helens son, and Wanda is Helens sister. HGW Corporation redeems 400 of Helens shares with a basis of $55,000 for $240,000. Helen purchased the stock three years ago as an investment. With respect to the stock redemption, Helen has:

A. Dividend income of $185,000.

B. Dividend income of $240,000.

C. Long-term capital gain of $185,000.

D. Long-term capital gain of $240,000.

Evan is the sole shareholder of Corporation. Evan transferred real estate to Corporation in exchange for all of the stock of Corporation. The real estate was a capital asset in Evans hands and will also be a capital asset when held by the corporation. Evans basis in the real estate was $10,000 and the value of the real estate was $8,000 on the date of the transfer. If Evan received $2,000 in cash and 100 shares of stock from the corporation in exchange for the real estate, the resulting bases for Evans stock and the corporations real estate are:

A. Evans stock basis is $8,000; Corporations basis in the real estate is $8,000

B. Evans stock basis is $10,000; Corporations basis in the real estate is $10,000

C. Evans stock basis is $10,000; Corporations basis in the real estate is $8,000

D. Evans stock basis is $6,000; Corporations basis in the real estate is $12,000

Paula receives a liquidating distribution from Pell Corporation. Paulas basis for her Pell stock is $10,000. In exchange for her stock, Paula receives real estate with an $8,000 basis and a $15,000 fair market value that is subject to a $2,000 mortgage. What is Paulas basis in the real estate she received?

A. $13,000.

B. $8,000.

C. $15,000.

D. $10,000.

Pursuant to a plan of corporate reorganization which qualified as an A reorganization, Lou received one share of stock of X Corporation worth $65 and cash of $20 in exchange for a share of stock in Y Corporation with a $95 basis to Lou. What is Lous recognized gain or loss on this exchange?

A. 0.

B. $10 loss.

C. $10 gain.

D. $20 gain.

Pursuant to a plan of corporate reorganization, Pat exchanged 1,000 shares of Stream Corporation stock that she had purchased for $60,000, for 1,200 shares of Creek Corporation voting stock having a fair market value of $70,000, and $10,000 in cash. What is Pats recognized gain on the exchange, and what is her basis in the Creek Corporations stock?

A. $10,000 gain; $60,000 basis.

B. $10,000 gain; $70,000 basis.

C. $20,000 gain; $60,000 basis.

D. $20,000 gain; $70,000 basis.