Manx Corporation transfers 40% of its stock and $50,000 in cash to Somali Corporation for $500,000 of assets and all $200,000 of its liabilities. Somali exchanges the Manx stock, cash, and its remaining $100,000 of assets with its shareholders for all of their stock in Somali. After the exchange, Somali liquidates. The exchange qualifies as what type of transaction?
|A.||“Type A” reorganization|
|B.||“Type B” reorganization|
|C.||“Type C” reorganization|
|D.||Acquisitive “Type D” reorganization|
|E.||A taxable exchange|
North Corporation acquires 90% of South’s assets (basis of $700,000) by exchanging $600,000 of its voting stock and assuming $300,000 of South’s liabilities. South distributes North stock, its remaining $100,000 in assets, and associated $40,000 in liabilities to its shareholder in exchange for his South stock (basis of $500,000). South then liquidates. How will this transaction be treated for tax purposes?
|A.||As a “Type A” reorganization and South recognizes $100,000 of gain|
|B.||As a “Type A” reorganization and South recognizes $60,000 of gain|
|C.||As a “Type C” reorganization and the shareholder recognizes $60,000 of gain|
|D.||As a “Type C” reorganization and the shareholder recognizes $100,000 of gain|
|E.||As a taxable transaction|
Qadira exchanges 40% of her common stock for 80% of newly issued preferred stock in the Pinto Corporation. There was no Pinto preferred stock previously outstanding, and Qadira received only stock. The other 20% of the preferred stock was received by another shareholder, solely in exchange for 10% of his common stock in Pinto. How is this transaction treated for tax purposes?
|A.||This is a taxable transaction|
|B.||This transaction qualifies as a “Type E” reorganization|
|C.||This transaction qualifies as a “Type B” reorganization|
|D.||This transaction qualifies as like-kind exchange|
|E.||None of the above|
Which of the following potentially is a disadvantage of electing to file a Federal corporate income tax consolidated return?
|A.||Additional administrative costs in complying with the election|
|B.||Deferral of gains realized in transactions between group members|
|C.||Increased basis in the stock of a subsidiary that generates annual taxable income|
|D.||Dividends received deduction for payments from a subsidiary to the group’s parent|
ParentCo’s separate taxable income was $200,000, and SubCo’s was $50,000. Consolidated taxable income before contributions was $200,000. Charitable contributions made by the affiliated group included $60,000 by ParentCo and $10,000 by SubCo. Compute the group’s maximum charitable contribution deduction.
Flapp Corporation, a domestic corporation, conducts all of its transactions in the U.S. dollar. It sells inventory for $1 million to a Canadian company when the exchange rate is $1US: $1.2Can. The Canadian company pays for the inventory when the exchange rate is $1US: $1.25Can. What is Flapp’s exchange gain or loss on this sale?
|A.||Flapp does not have a foreign currency exchange gain or loss, since it conducts all of its transactions in the U.S. dollar.|
|B.||Flapp’s account receivable for the sale is $1 million (when the exchange rate is $1US: $1.2Can.) and it collects on the receivable when the exchange rate is $1US: $1.25Can. Flapp has an exchange gain of $50,000.|
|C.||Flapp’s account receivable for the sale is $1 million (when the exchange rate is $1US: $1.2Can.). It collects on the receivable at $1US: $1.25Can. Flapp has an exchange loss of $5,000.|
|D.||Flapp’s foreign currency exchange loss is $50,000.|
|A.||Translated at the exchange rate when paid.|
|B.||Translated at the exchange rate on date accrued.|
|C.||Translated at the average exchange rate for the tax year.|
|D.||Translated at the average exchange rate for the last five years.|
Which of the following is not a foreign person?
|A.||Citizen of Germany with U.S. permanent resident status (i.e., green card).|
|B.||Foreign corporation 100% owned by a domestic corporation.|
|C.||Foreign corporation 51% owned by U.S. shareholders.|
|D.||Citizen of Italy who spends 14 days vacationing in the United States.|
ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an unrelated domestic corporation. USCo has historically earned 79% of its gross income from active foreign-source business income. What amount of ForCo’s interest income is U.S.-source?
Which of the following foreign taxes paid by a U.S. corporation is eligible for the foreign tax credit?
|A.||Real property taxes|
|B.||Value added taxes|
|C.||Dividend withholding taxes|
USCo has foreign-source income from a manufacturing operation, from sales of the manufactured goods, and from stocks and bonds held for investment. How many categories or “baskets” of income does USCo have for foreign tax credit limitation purposes?
Which of the following is a correct definition of a concept related to partnership taxation?
|A.||The entity concept treats partners and partnerships as separate units and gives the partnership its own tax “personality.”|
|B.||A partner’s capital sharing ratio is defined as the percent of partnership profits that will be allocated to the partner.|
|C.||The partnership’s inside basis is defined as the sum of each partner’s capital account balance.|
|D.||A special allocation is defined as an amount that could differently affect the tax liabilities of two or more partners.|
|E.||None of these statements is correct.|
Landon received $50,000 cash and a capital asset (basis of $70,000 and fair market value of $80,000) in a proportionate liquidating distribution. His basis in his partnership interest was $100,000 prior to the distribution. How much gain or loss does Landon recognize and what is his basis in the asset received?
|A.||$0 gain or loss; $70,000 basis|
|B.||$0 gain or loss; $50,000 basis|
|C.||$20,000 gain; $70,000 basis|
|D.||$30,000 gain; $70,000 basis|
|E.||$30,000 gain; $80,000 basis|
In a proportionate liquidating distribution, Scott receives a distribution of $20,000 cash, accounts receivable (basis of $0 and fair market value of $40,000), and land (basis of $30,000 and fair market value of $60,000). In addition, the partnership repays all liabilities, of which Scott’s share was $20,000. Scott’s basis in the entity immediately before the distribution was $100,000. As a result of the distribution, what is Scott’s basis in the accounts receivable and land, and how much gain or loss does he recognize?
|A.||$0 basis in accounts receivable; $30,000 basis in land; $0 gain or loss|
|B.||$0 basis in accounts receivable; $60,000 basis in land; $0 gain or loss|
|C.||$40,000 basis in accounts receivable; $30,000 basis in land; $0 gain or loss|
|D.||$40,000 basis in accounts receivable; $60,000 basis in land; $20,000 gain|
|E.||$0 basis in accounts receivable; $80,000 basis in land; $20,000 loss|
Which, if any, of the following is not an eligible shareholder of an S corporation?
|A.||A child, age 9|
|B.||Spouse of a nonresident alien in a community property state|
|C.||A voting trust|
|D.||An estate of a deceased shareholder|
|E.||All of the above can own S corporation stock|
Which transaction affects the Other Adjustments Account on an S corporation’s Schedule M-2?
|C.||Payroll tax penalty assessed|
|D.||Domestic production activities deduction|
|E.||None of the above|
How large must total assets on Schedule L be at the end of the year for an S corporation to be required to file Schedule M-3?
|E.||Not required to file|