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Exam 12: Corporate Formations and Operations

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Question 51

True/False

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Control as it relates to a section 351 transaction is strictly defined to be 80 percent or more of the voting power of the stock of the corporation to which property is transferred.

A) True
B) False

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Question 52

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What is the unextended due date of the tax return of a calendar-year corporation?

A) February 15.
B) March 15.
C) April 15.
D) October 15.

E) B) and D)
F) A) and D)

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Question 53

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The definition of property as it relates to a section 351 transaction includes money.

Net capital loss carryovers but not carrybacks are deductible against capital gains in determining a corporation's net operating loss for the year.

Which of the following is unnecessary to allow an accrual-method calendar year corporation to deduct charitable contributions before actually paying the contribution to charity?

The corporate tax form is Form 1065.

AB Inc.received a dividend from CD Corporation and is able to claim the dividends received deduction without limitation.AB owns 30 percent of CD.What is AB's marginal tax rate (to the nearest tenth of a percent)on the dividends received (after taking the DRD into account)?

Phillip incorporated his sole proprietorship by transferring inventory,a building,and land to the corporation in return for 100 percent of the corporation's stock.The property transferred to the corporation had the following fair market values and tax bases. $\begin{array}{l}\begin{array}{lll}\\\text {Inventory} \\\text {Building} \\\text {Land} \\\text {Total} \\\end{array}\begin{array}{lll}\text { FMV } & \text { Tax Basis } \\\$ 100,000& \$ 50,000 \\100,000 & 250,000 \\\underline {200,000 }& \underline {150,000}\\\underline {\$ 400,000}&\underline {\$ 450,000}\\\end{array}\end{array}$ The fair market value of the corporation's stock received in the exchange was $400,000.The transaction met the requirements to be tax-deferred under section 351. a.What amount of net gain or loss does Phillip realize on the transfer of the property to his corporation? b.What amount of gain or loss does Phillip recognize on the transfer of the property to his corporation? 

Which of the following statements is false regarding corporate estimated tax payments?

Amy transfers property with a tax basis of $900 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $450 in a transaction that qualifies for deferral under section 351.The corporation assumed a liability of $150 on the property transferred.What is Amy's tax basis in the stock received in the exchange?

Over what time period do corporations amortize purchased goodwill for tax purposes?

Federal income tax expense reported on a corporation's books generates a temporary book-tax difference.

Which of the following statements regarding book-tax differences is true?

Which of the following statements best describes the impact of receiving boot in a section 351 transaction?

Schedule M-1 reconciles from book income to the taxable income that is applied to the tax rate to determine the corporation's gross tax liability.

Gain or loss realized in a section 351 transaction will be recognized if the taxpayer receives boot in the exchange.

Which of the following describes the correct treatment of incentive stock options (ISOs) ?

A corporation may carry a net capital loss back three years and forward five years.

Corporations have a larger standard deduction than individual taxpayers because they generally have higher revenues.

Don and Marie formed Paper Lilies Corporation on January 2.Don contributed cash of $400,000 in return for 50 percent of the corporation's stock.Marie contributed a building and land with the following fair market values and tax bases in return for 50 percent of the corporation's stock. $\begin{array} { l r r } & \text { FMV } & \text { Tax Basis } \\\text { Building }& 180,000 & 120,000 \\\text { Land } &\underline { 270,000} & \underline {80,000} \\\text { Total }& \underline {\$ 450,000} & \underline {\$ 200,000}\end{array}$ To equalize the exchange,Paper Lilies Corporation paid Marie $50,000 in addition to her stock. a.What amount of gain or loss does Marie realize on the formation of the corporation? b.What amount of gain or loss,if any,does she recognize? c.What is Marie's tax basis in the stock she receives in return for her contribution of property to the corporation? d.What tax basis does Paper Lilies Corporation take in the land and building received from Marie?