Area V: Entity Taxation

Corporation C had book income of $500,000. Included in book income was $10,000 of municipal bond interest. C paid $5,000 in premiums for a life insurance policy on its CEO (C is the beneficiary). C also had a net capital loss of $8,000 for the year. What is C's taxable income?

S Corporation Status: Which of the following shareholders would cause a corporation to be INELIGIBLE to make an S election?

Partner A contributed property with a basis of $10,000 and a fair market value (FMV) of $20,000 to the AB Partnership in exchange for a 50% interest. The property was subject to a $4,000 mortgage which the partnership assumed. What is A's initial outside basis in the partnership interest?

A C Corporation owns 30% of the voting stock of a domestic corporation. The C Corporation received $10,000 in dividends from this investment. The C Corporation's taxable income before the dividends received deduction (DRD) was $8,000. What is the allowable DRD?

A taxpayer holds a 50% interest in an S Corporation. At the beginning of the year, their stock basis was $10,000. During the year, the S Corp reported: Ordinary Income $5,000; Tax-Exempt Interest $1,000; Cash Distribution to Taxpayer $8,000. What is the taxpayer's stock basis at the end of the year?

Which of the following creates a 'temporary difference' between book income and tax income?

A C Corporation had a net capital loss of $10,000 in Year 4. It had reported net capital gains of $2,000 in Year 1, $3,000 in Year 2, and $1,000 in Year 3. What is the amount of capital loss carryforward to Year 5?

Which of the following is a 'separately stated item' on a Partnership Schedule K-1?

Which of the following is a requirement for a 'Qualified Subchapter S Subsidiary' (QSub)?

Which of the following entities reports its income on Form 1065?

A C Corporation distributes land to a shareholder as a dividend. The land has an adjusted basis of $10,000 and a fair market value (FMV) of $30,000. What are the tax consequences to the Corporation?

A partner in a partnership receives a guaranteed payment of $10,000 for services rendered. The partnership has $50,000 of ordinary income before the guaranteed payment. The partner has a 50% profits interest. What is the partner's total income from the partnership to be reported on their Form 1040?

In a liquidating distribution of a partnership, Partner P receives cash of $10,000 and inventory with a basis to the partnership of $5,000. P's outside basis in the partnership was $8,000 prior to the distribution. What is P's recognized gain or loss?

Which of the following organizations must file an annual information return (Form 990) with the IRS?

A corporation has a $50,000 Net Operating Loss (NOL) in the current year (Year 5). It had taxable income of $20,000 in Year 1, $10,000 in Year 2, and $30,000 in Year 3. How is the NOL treated?

Which of the following creates 'nexus' for state income tax purposes under Public Law 86-272?

A C Corporation has gross income of $500,000, operating expenses of $300,000, and dividends received from a 25%-owned domestic corporation of $100,000. What is the corporation's Dividends Received Deduction (DRD)?

Shareholder A contributes property with a basis of $20,000 and FMV of $50,000 to a C Corporation in exchange for 40% of the stock. Shareholder B contributes services worth $75,000 for 60% of the stock. What is Shareholder A's recognized gain?

A C Corporation distributes land to its sole shareholder as a dividend. The land has a basis of $20,000 and a FMV of $60,000. The corporation has ample E&P. What are the tax consequences to the corporation?

An S Corporation has an Accumulated Adjustments Account (AAA) of $20,000 and Accumulated Earnings and Profits (AEP) from C Corp years of $10,000. The corporation distributes $35,000 to its sole shareholder. The shareholder's stock basis (before distribution) is $50,000. How is the distribution taxed?

Partner A contributes land with a basis of $40,000 and FMV of $100,000 to a partnership for a 50% interest. The land is subject to a $20,000 mortgage which the partnership assumes. What is Partner A's initial outside basis?

A partnership distributes cash of $10,000 and property with a basis of $15,000 (FMV $20,000) to a partner in a non-liquidating distribution. The partner's outside basis before distribution was $22,000. What is the partner's basis in the received property?

Which of the following items is a permanent difference for Schedule M-1 purposes?

A C Corporation had a net capital loss of $20,000 in Year 4. It had capital gains of $5,000 in Year 1, $8,000 in Year 2, and $0 in Year 3. What is the amount of capital loss carryforward to Year 5?

Which of the following entities is eligible to elect S Corporation status?

A C Corporation distributes assets in a complete liquidation. The assets have a basis of $100,000 and FMV of $300,000. The corporation has a $50,000 liability on the assets, which the shareholder assumes. What is the gain recognized by the corporation?

Which of the following organizations must file an annual information return (Form 990) with the IRS?

A multistate corporation has the following factors: Sales in State A $500,000; Total Sales $1,000,000. Payroll in State A $100,000; Total Payroll $1,000,000. Property in State A $200,000; Total Property $1,000,000. State A uses a double-weighted sales factor apportionment formula. What is the apportionment percentage for State A?

A C Corporation incurs $60,000 of organizational costs in its first year of operations. What is the maximum deduction for organizational costs in the first year?

A C Corporation distributes a property dividend. The property has a basis of $10,000, FMV of $40,000, and is subject to a liability of $15,000 assumed by the shareholder. The corporation has E&P of $100,000. What is the amount of the dividend income to the shareholder?

A taxpayer has a 50% interest in a partnership. The partnership agreement states that the taxpayer receives a guaranteed payment of $20,000 for services. The partnership reports $50,000 of ordinary income before the guaranteed payment. What is the taxpayer's total income from the partnership?

A taxpayer is a 10% shareholder in an S Corporation. The corporation paid $5,000 of health insurance premiums for the taxpayer. How is this reported?

Which of the following is a 'Section 751 asset' (Hot Asset) that triggers ordinary income recognition upon the sale of a partnership interest?

A tax-exempt organization has $5,000 of unrelated business taxable income (UBTI). What is the filing requirement and tax rate?

Which of the following is a primary difference between a Public Charity and a Private Foundation?

Pace Corp. is incorporated in State A but does business in States A, B, and C. State B uses a three-factor apportionment formula (Sales, Payroll, Property) with a double-weighted sales factor. Pace has the following activity in State B:<br/>- Sales: $2,000,000 (Total company sales: $10,000,000)<br/>- Payroll: $500,000 (Total company payroll: $5,000,000)<br/>- Property: $1,000,000 (Total company property: $4,000,000)<br/>What is Pace's apportionment percentage for State B?

A C Corporation has current year Earnings & Profits (E&P) of $20,000 and accumulated E&P of ($30,000) at the beginning of the year. The corporation makes a $25,000 cash distribution to its sole shareholder. What is the tax treatment of the distribution?

Shareholders A (80%) and B (20%) form a C Corporation. A contributes property with a basis of $20,000 and FMV of $80,000. B contributes services worth $20,000. What is the tax consequence to Shareholder A?

A C Corporation has taxable income of $500,000 before the charitable contribution deduction and the Dividends Received Deduction (DRD). It made cash charitable contributions of $60,000. It received $10,000 in dividends from a 15%-owned domestic corporation. What is the corporation's allowable charitable contribution deduction?

Which of the following entities is eligible to elect S Corporation status?

An S Corporation distributes property with a fair market value of $50,000 and an adjusted basis of $30,000 to its sole shareholder. What is the tax consequence to the S Corporation?

A partner contributes services worth $50,000 in exchange for a 25% capital interest in a partnership. The partnership has no liabilities. What is the partner's recognized income and initial basis in the partnership interest?

In a non-liquidating distribution, a partnership distributes cash of $10,000 and property with an adjusted basis of $20,000 to a partner. The partner's outside basis immediately before the distribution was $25,000. What is the partner's basis in the distributed property?

Which of the following items is a 'separately stated item' on a Partnership Schedule K-1?

Which of the following is a 'permanent difference' for Schedule M-3 reconciliation purposes?

A C Corporation incurs $55,000 in organizational costs to start the business. It begins business on July 1, Year 1. What is the maximum deduction for organizational costs in Year 1?

A C Corporation has a net capital loss of $10,000 in Year 4. It reported the following net capital gains in prior years: Year 1: $2,000; Year 2: $3,000; Year 3: $1,000. What is the amount of capital loss carryforward to Year 5?

Which of the following creates a 'temporary difference' for deferred tax purposes?

A taxpayer is a 50% partner in a partnership. The partnership agreement states that the taxpayer is guaranteed a payment of $20,000 for services, plus 50% of the partnership income after deducting the guaranteed payment. The partnership reports $60,000 of income before the guaranteed payment. What is the taxpayer's total income from the partnership?

A C Corporation distributes land to a shareholder as a dividend. The land has a FMV of $50,000 and is subject to a liability of $60,000 that the shareholder assumes. The corporation's basis in the land is $20,000. What is the gain recognized by the corporation?

A taxpayer is a 10% shareholder in an S Corporation. The taxpayer's stock basis at the beginning of the year is $10,000. The S Corporation reports a $200,000 ordinary loss for the year. The taxpayer's share is $20,000. The taxpayer also has a $5,000 loan outstanding to the corporation. What amount of loss can the taxpayer deduct in the current year?

Which of the following is a requirement for a corporation to be classified as a Personal Holding Company (PHC)?

Regarding the Accumulated Earnings Tax (AET), what is the minimum accumulated earnings credit allowed for a manufacturing C Corporation?

A taxpayer is a 40% partner in a partnership. The partnership has $100,000 of recourse liabilities and $50,000 of nonrecourse liabilities. The taxpayer bears the economic risk of loss for the recourse liabilities. What is the taxpayer's share of liabilities for basis purposes?

A C Corporation distributes appreciated property to a shareholder in a complete liquidation. Which of the following statements is correct?

A taxpayer is a general partner in a partnership. The partnership agreement provides for a guaranteed payment for services. Which of the following taxes is the guaranteed payment subject to?

Which of the following tax-exempt organizations must file an annual information return (Form 990)?

Redwood Corp., a C corporation, had book income of $500,000. Included in book income was $10,000 of municipal bond interest. The corporation paid $5,000 in premiums on a key-person life insurance policy (corporation is beneficiary). What is Redwood's taxable income?

A C corporation owns 25% of the stock of another domestic corporation. The C corporation received $100,000 in dividends from this investment. The C corporation's taxable income before the dividends-received deduction (DRD) is $200,000. What is the amount of the DRD?

Shareholders of a calendar-year C corporation want to elect S corporation status for the current year. What is the deadline for filing Form 2553 to be effective for the current year?

At the beginning of the year, a shareholder had a stock basis of $10,000 in an S corporation. During the year, the shareholder's share of ordinary income was $5,000, and the corporation made a cash distribution of $12,000 to the shareholder. What is the shareholder's stock basis at year-end?

A partner contributes property with an adjusted basis of $20,000 and a fair market value of $50,000 to a partnership in exchange for a 50% interest. The property is subject to a liability of $10,000, which the partnership assumes. What is the partner's initial outside basis in the partnership?

Which of the following organizations must file an annual information return (Form 990) with the IRS?

A C corporation distributes land to a shareholder as a dividend. The land has an adjusted basis of $20,000 and a fair market value of $50,000. The land is subject to a liability of $10,000, which the shareholder assumes. What is the amount of gain recognized by the corporation?

Which of the following statements is correct regarding the Net Operating Loss (NOL) rules for C corporations for tax years beginning after 2020?

A taxpayer holds a 30% interest in a partnership. The partnership agreement states that the taxpayer's share of liabilities is 30%. The partnership has $100,000 in nonrecourse liabilities. The taxpayer has an outside basis of $50,000. The partnership incurs a loss of $200,000 for the year. What is the maximum loss the taxpayer can deduct, assuming the passive activity rules do not apply?

Which of the following is a requirement for a corporation to elect S corporation status?

A C corporation has current Earnings & Profits (E&P) of $20,000 and accumulated E&P of ($30,000) deficit at the beginning of the year. The corporation makes a $25,000 cash distribution to its sole shareholder. How much of the distribution is a taxable dividend?

A C corporation incurred $60,000 of organizational costs in its first year of operations. What is the maximum deduction the corporation can take for these costs in its first tax year?

A taxpayer contributes property with a basis of $10,000 and FMV of $20,000 to a C corporation in exchange for 100% of the stock. The taxpayer also receives $2,000 in cash. What is the recognized gain?

Which of the following is a 'separately stated item' on a Partnership Schedule K-1?

A taxpayer is a 50% shareholder in an S corporation. The corporation has $0 accumulated E&P. At the beginning of the year, the shareholder's stock basis was $10,000. The corporation reported $5,000 of ordinary income and distributed $20,000 cash to the shareholder. What is the shareholder's recognized gain?

A C corporation distributes assets in a complete liquidation. The assets have a basis of $100,000 and FMV of $150,000. The shareholder has a stock basis of $80,000. What are the tax consequences?

A multi-state corporation has the following factors: Property 80% in State A; Payroll 50% in State A; Sales 50% in State A. State A uses an apportionment formula that double-weights the sales factor. What is the apportionment percentage for State A?

Which of the following creates 'nexus' for sales tax purposes under the Supreme Court's Wayfair decision?

A partner in a partnership receives a guaranteed payment of $10,000 for services rendered. The partnership has $50,000 of ordinary income before the guaranteed payment. The partner has a 50% profit interest. What is the partner's total income from the partnership?