Law question data bank

13965
Sage, Inc., a closely held corporation that is not a PSC, has a $110,000 passive loss, $90,000 of active income, and $25,000 of portfolio income during the year. How much of the passive loss can Sage deduct in the current year?

a. $0.
b. $25,000.
c. $90,000.
d. $110,000.
e. None of the above.

14066
During the current year, Violet, Inc., a closely held corporation (not a PSC), has $130,000 of passive loss, $90,000 of active business income, and $70,000 of portfolio income. How much is Violet’s taxable income for the current year?

a. $30,000.
b. $70,000.
c. $90,000.
d. $160,000.
e. None of the above.

14167
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 above.

14268
In the current year, Plum Corporation, a computer manufacturer, donated 100 laptop computers to a local school district (a qualified educational organization). The computers were constructed by Plum earlier this year, and the school district allocated the computers among its various schools where they will be used for educational purposes. Plum’s basis in the computers is $50,000, 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. $0.
b. $50,000.
c. $85,000.
d. $100,000.
e. $120,000.

14369
During the current year, Kingbird Corporation (a calendar year C corporation) had the following income and expenses:

Income from operations	$135,000
Expenses from operations	99,000
Dividends received (40% ownership)	9,000
Domestic production activities deduction	2,700

On October 1, Kingbird Corporation made a contribution to a qualified charitable organization of $6,300 in cash (not included in any of the above items). Determine Kingbird’s charitable contribution deduction for the current year.

a. $0.
b. $4,230.
c. $4,500.
d. $6,300.
e. None of the above.

14470
Hippo, Inc., a calendar year C corporation, manufactures golf gloves. For 2011, Hippo had taxable income (before DPAD) of $800,000, qualified domestic production activities income of $950,000, and W-2 wages related to qualified production activities income of $130,000. Hippo’s domestic production activities deduction for 2011 is:

a. $0.
b. $65,000.
c. $72,000.
d. $85,500.
e. None of the above.

14571
In the current year, Amber, Inc., a calendar C corporation, has income from operations of $200,000 and operating deductions of $225,000. Amber also had $30,000 of dividends from a 25% stock ownership in a domestic corporation. Which of the following statements is incorrect with respect to Amber’s net operating loss deduction?

a. The NOL is carried back 3 years and forward 10 years by Amber.
b. Amber’s NOL is $19,000.
c. A dividends received deduction is allowed in computing Amber’s NOL.
d. Amber can elect to forgo the carryback period and only carry forward the NOL.
e. None of the above.

14672
Which of the following statements is incorrect with respect to the treatment of net operating losses by corporations?

a. A corporation may elect to forgo the carryback period and just carryforward an NOL.
b. A corporation may claim a dividends received deduction in computing an NOL.
c. An NOL is generally carried back 2 years and forward 20 years.
d. Unlike individuals, corporations do not adjust their NOLs for net capital losses or nonbusiness deductions.
e. None of the above.

14773
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?

a. Red owns 80% of Blue Corporation.
b. Red owns 20% or more, but less than 80% of Blue Corporation.
c. Red owns less than 20% of Blue Corporation.
d. Red owns 80% or more of Blue Corporation.
e. None of the above.

14874
Eagle Corporation owns stock in Hawk Corporation and has taxable income of $100,000 for the year before considering the dividends received deduction. Hawk Corporation pays Eagle a dividend of $130,000, which was considered in calculating the $100,000. What amount of dividends received deduction may Eagle claim if it owns 25% of Hawk’s stock?

a. $0.
b. $80,000.
c. $100,000.
d. $104,000.
e. None of the above.

14975
Copper Corporation owns stock in Bronze Corporation and has net operating income of $900,000 for the year. Bronze Corporation pays Copper a dividend of $150,000. What amount of dividends received deduction may Copper claim if it owns 65% of Bronze stock (assuming Copper’s dividends received deduction is not limited by its taxable income)?

a. $97,500.
b. $105,000.
c. $120,000.
d. $150,000.
e. None of the above.

15076
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. $9,000.
b. $42,000.
c. $48,000.
d. $60,000.
e. None of the above.

15177
Which of the following statements is incorrect regarding the dividends received deduction?

a. A corporation must hold stock for more than 90 days in order to qualify for a deduction with respect to dividends on such stock.
b. The taxable income limitation does not apply with respect to the 100% deduction available to members of an affiliated group.
c. If a stock purchase is financed 75% by debt, the deduction for dividends on such stock is reduced by 75%.
d. The taxable income limitation does not apply if the normal deduction (i.e., 70% or 80% of dividends) results in a net operating loss for the corporation.
e. None of the above.

15278
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.

15379
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.

15480
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.

15581
Which of the following statements is incorrect regarding the taxation of C corporations?

a. The highest corporate marginal tax rate is 39%.
b. Taxable income of a personal service corporation is taxed at a flat rate of 35%.
c. A tax return must be filed whether or not the corporation has taxable income.
d. Similar to those applicable to individuals, the marginal tax rate brackets for corporations are adjusted for inflation.
e. None of the above.

15682
Which of the following statements is correct regarding the taxation of C corporations?

a. The due date for a corporate income tax return (ignoring extensions) is the fifteenth day of the third month following the close of the corporation’s tax year.
b. A corporation with taxable income of less than $500 need not file a tax return.
c. The alternative minimum tax does not apply.
d. In general, the required annual payment for corporate estimated taxes is 90% of the corporation’s final tax for the current year.
e. None of the above.

15783
Vireo Corporation, a calendar year C corporation, has taxable income of $1.3 million and $3 million for 2010 and 2011, respectively. The minimum 2011 estimated tax installment payments for Vireo are:

a. April 15, 2011, $110,500; June 15, 2011, $110,500; September 15, 2011, $110,500; December 15, 2011, $110,500.
b. April 15, 2011, $110,500; June 15, 2011, $399,500; September 15, 2011, $399,500; December 15, 2011, $399,500.
c. April 15, 2011, $110,500; June 15, 2011, $399,500; September 15, 2011, $255,000; December 15, 2011, $255,000.
d. April 15, 2011, $255,000; June 15, 2011, $255,000; September 15, 2011, $255,000; December 15, 2011, $255,000.
e. None of the above.

15884
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?

a. Premiums paid on key employee life insurance.
b. Proceeds of life insurance paid on death of key employee.
c. Charitable contributions carryover from previous year.
d. Tax-exempt interest.
e. None of the above.

15985
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 a subtraction on Schedule M-1?

a. Proceeds on key employee life insurance.
b. Excess of capital losses over capital gains.
c. Book depreciation in excess of tax depreciation.
d. Income subject to tax but not recorded on the books.
e. None of the above.