Reference no: EM13378683

1. Donald owns a 60% interest in a partnership that earned $230,000 in the current year. He also owns 60% of the stock in a C corporation that earned $230,000 during the year. Donald received $50,000 in distributions from each of the two entities during the year. With respect to this information, Donald must report $188,000 of income on his individual income tax return for the year.

a. True
b. False

2. Ivory Corporation, a calendar year, accrual method C corporation, has two cash method, calendar year shareholders who are unrelated to each other. Craig owns 55% of the stock, and Oscar owns the remaining 45%. During 2011, Ivory paid a salary of $200,000 to each shareholder. On December 31, 2011, Ivory accrued a bonus of $50,000 to each shareholder. Assuming that the bonuses are paid to the shareholders on February 1, 2012, compute Ivory Corporation's 2011 deduction for the above amounts.

a. $0.
b. $250,000.
c. $400,000.
d. $450,000.
e. $500,000.

3. Bear Corporation has a net short-term capital gain of $35,000 and a net long-term capital loss of $200,000 during 2011. Bear Corporation has taxable income from other sources of $600,000. Prior years' transactions included the following:

2007	Net short-term capital gain	$45,000
2008	Net long-term capital gain	20,000
2009	Net short-term capital gain	55,000
2010	Net long-term capital gain	30,000

Compute the amount of Bear's capital loss carryover to 2012.

a. $0.
b. $60,000.
c. $105,000.
d. $165,000.
e. $200,000.

4. Grocer Services Corporation (a calendar year taxpayer), a wholesale distributor of food, made the following donations to qualified charitable organizations during the year:

	Adjusted Basis	Fair Market Value
Food (held as inventory) donated to the Ohio   Children's Shelter	$3,500	$8,000
Passenger van to Ohio Children's Shelter, to be used to    transport children to school	7,500	7,100
Stock in Acme Corporation acquired 7 months ago and   held as an investment, donated to Southwest University	4,000	6,200

How much qualifies for the charitable contribution deduction?

a. $15,000.
b. $16,850.
c. $17,250.
d. $19,450.
e. None of the ab

5. Emerald Corporation, a calendar year C corporation, was formed and began operations on July 1, 2011. The following expenses were incurred during the first tax year (July 1 through December 31, 2011) of operations:

Expenses of temporary directors and of organizational meetings	$9,000
Fee paid to the state of incorporation	1,000
Accounting services incident to organization	2,500
Legal services for drafting the corporate charter and bylaws	3,500
Expenses incident to the printing and sale of stock certificates	4,000

Assuming a § 248 election, what is the Emerald's deduction for organizational expenditures for 2011?

a. $0.
b. $533.
c. $5,367.
d. $5,500.
e. None of the above.

6. During 2011, Sparrow Corporation, a calendar year C corporation, had operating income of $510,000, operating expenses of $370,000, a short-term capital loss of $25,000, and a long-term capital gain of $80,000. How much is Sparrow's tax liability for 2011?

a. $46,100.
b. $59,300.
c. $69,050.
d. $76,050.
e. None of the above.

7. George Judson is the sole shareholder and employee of Black Corporation, a C corporation that is engaged exclusively in engineering services. During the year, Black has gross revenues of $420,000 and operating expenses (excluding salary) of $200,000. Further, Black Corporation pays George a salary of $190,000. The salary is reasonable in amount and George is in the 35% marginal tax bracket irrespective of any income from Black. Assuming that Black Corporation distributes all after-tax income as dividends, how much total combined income tax do Black and George pay in the current year? (Ignore any employment tax considerations.)

a. $66,675.
b. $79,925.
c. $83,325.
d. $87,500.
e. None of the above.