CHAPTER 17 CORPORATIONS: INTRODUCTION AND

1. Beige Corporation, a C corporation, purchases a warehouse on August 1, 1998, for $1 million. Straight-line depreciation is taken in the amount of $411,750 before the property is sold on June 11, 2014, for $1.2 million. What is the amount and character of the gain recognized by Beige on the sale of the realty?

a. Ordinary income of $0 and § 1231 gain of $611,750.

b. Ordinary income of $411,750 and § 1231 gain of $200,000.

c. Ordinary income of $82,350 and § 1231 gain of $529,400.

d. Ordinary income of $117,650 and § 1231 gain of $494,100.

e. None of the above.

2. During the current year, Woodchuck, Inc., a closely held personal service corporation, has $115,000 of net active income, $40,000 of portfolio income, and $135,000 of passive activity loss. What is Woodchuck’s taxable income for the current year?

a. $0.

b. $20,000.

c. $40,000.

d. $155,000.

e. None of the above.

3. Grackle Corporation, a personal service corporation, had $230,000 of net active income, $40,000 of portfolio income, and a $250,000 passive activity loss during the year. How much is Grackle’s taxable income?

a. $20,000.

b. $40,000.

c. $270,000.

d. $520,000.

e. None of the above.

4. Grebe Corporation, a closely held corporation that is not a PSC, had $75,000 of net active income, $60,000 of portfolio income, and a $105,000 passive activity loss during the year. How much of the passive activity loss can Grebe deduct in the current year?

a. $0.

b. $60,000.

c. $105,000.

d. $135,000.

e. None of the above.

5. During the current year, Violet, Inc., a closely held corporation (not a PSC), has $55,000 of passive activity loss, $80,000 of net active income, and $20,000 of portfolio income. How much is Violet’s taxable income for the current year?

a. $20,000.

b. $45,000.

c. $80,000.

d. $100,000.

e. None of the above.

6. During the current year, Owl Corporation (a C corporation), a retailer of children’s apparel, made the following

donations to qualified charitable organizations.

Adjusted Basis Fair Market Value

Children’s clothing held as inventory, to Haven for Hope $10,000 $15,000

Stock in Exxon Corporation acquired two years ago and

held as an investment, to City University 5,000 3,000

Land acquired four years ago and held as an investment,

to Humane Society

50,000 75,000

How much qualifies for the charitable contribution deduction? a. $63,000.

b. $65,000.

c. $90,500.

d. $92,500.

e. None of the above.

7. In the current year, Plum Corporation, a computer manufacturer, donated 100 laptop computers to a local university (a qualified educational organization). The computers were constructed by Plum earlier this year, and the university will use the computers for research and research training. Plum’s basis in the computers is $35,000, and their fair market value is $120,000. What is Plum’s deduction for the contribution of the computers (ignoring the taxable income limitation)?

a. $35,000.

b. $70,000.

c. $77,500.

d. $85,000.

e. $120,000.

8. During the current year, Kingbird Corporation (a calendar year C corporation) had the following income and expenses:

Income from operations	$200,000
Expenses from operations	140,000
Dividends received (15% ownership)	15,000
Domestic production activities deduction	2,000

On October 1, Kingbird Corporation made a contribution to a qualified charitable organization of $9,000 in cash (not included in any of the above items). Determine Kingbird’s charitable contribution deduction for the current year.

a. $9,000.

b. $7,500.

c. $6,650.

d. $6,450.

e. None of the above.