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Exam 2: Corporations: Introduction and Operating Rules

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Question 61

True/False

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Under the "check-the-box" Regulations,a single-member LLC that fails to elect to be to treated as a corporation will be taxed as a sole proprietorship.

A) True
B) False

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Question 62

Multiple Choice

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Orange Corporation owns stock in White Corporation and has net operating income of $400,000 for the year.White Corporation pays Orange a dividend of $60,000.What amount of dividends received deduction may Orange claim if it owns 15% of White stock (assuming Orange's dividends received deduction is not limited by its taxable income) ?

A) $0.
B) $42,000.
C) $48,000.
D) $60,000.
E) None of the above.

F) A) and D)
G) D) and E)

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Question 63

Multiple Choice

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Maize Corporation had $200,000 operating income and $90,000 operating expenses during the year.In addition,Maize had a $25,000 long-term capital gain and a $16,000 short-term capital loss.Compute Maize's taxable income for the year.

Albatross,a C corporation,had $125,000 net income from operations and a $10,000 short-term capital loss in 2010.Albatross Corporation's taxable income is $115,000.

Briefly describe the accounting methods available for adoption by a C corporation.

Schedule M-1 of Form 1120 is used to reconcile financial net income with taxable income reported on the corporation's income tax return as follows: net income per books + additions - subtractions = taxable income.Which of the following items is an addition on Schedule M-1?

Red Corporation,which owns stock in Blue Corporation,had net operating income of $200,000 for the year.Blue pays Red a dividend of $40,000.Red takes a dividends received deduction of $28,000.Which of the following statements is correct?

Elk,a C corporation,has $500,000 operating income and $350,000 operating expenses during the year.In addition,Elk has a $20,000 long-term capital gain and a $52,000 short-term capital loss.Elk's taxable income is:

Beige Company has approximately $250,000 in net income in 2010 before deducting any compensation or other payment to its sole owner,Janet (who is single).Assume that Janet is in the 35% marginal tax bracket.Discuss the tax aspects of each of the following arrangements.(Ignore any employment tax considerations. )

Flycatcher Corporation,a C corporation,has two equal individual shareholders,Nancy and Pasqual.In the current year,Flycatcher earned $200,000 net profit and paid a dividend of $40,000 to each shareholder.Regardless of any tax consequences resulting from their interests in Flycatcher,Nancy is in the 28% marginal tax bracket and Pasqual is in the 35% marginal tax bracket.With respect to the current year,which of the following statements is incorrect?

Egret Corporation,a calendar year C corporation,had an excess charitable contribution for 2009 of $15,000.In 2010,it made a further charitable contribution of $20,000.Its 2010 deduction is limited to $25,000 (10% of taxable income).In applying the 10% limitation,the $15,000 carryover is used before the current year contribution.

For a corporation in 2010,the domestic production activities deduction is equal to 9% of the lower of (1)qualified production activities income or (2)taxable income.However,the deduction cannot exceed 50% of the W-2 wages related to qualified production activities income.