Law question data bank

170. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest96
Warbler Corporation, an accrual method regular corporation, was formed and began operations on March 1, 2011. The following expenses were incurred during its first year of operations (March 1 - December 31, 2011):

Expenses of temporary directors and organizational meetings	$25,000
Incorporation fee paid to state	2,000
Expenses incurred in printing and selling stock certificates	10,000
Accounting services incident to organization	12,000

a.	Assuming a valid election under § 248 to amortize organizational expenditures, what is the amount of Warbler’s deduction for 2011?
b.	Same as a., except that Warbler also incurred in 2011 legal fees of $15,000 for the drafting of the corporate charter and bylaws. What is the amount of Warbler’s 2011 deduction for organizational expenditures?

171. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest97
In each of the following independent situations, determine the corporation’s income tax liability. Assume that all corporations use a calendar year and that the year involved is 2011.

	Taxable Income
Violet Corporation	$ 22,000
Indigo Corporation	90,000
Orange Corporation	220,000
Blue Corporation	5,100,000
Green Corporation	19,800,000

172. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest98
Almond Corporation, a calendar year C corporation, had taxable income of $900,000, $1.1 million, and $790,000 for 2008, 2009, and 2010, respectively. Almond’s taxable income is $1.5 million for 2011. Compute the minimum estimated tax payments for 2011 for Almond Corporation.

173. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest99
Heron Corporation, a calendar year, accrual basis taxpayer, provides the following information for this year and asks you to prepare Schedule M-1:

Net income per books (after-tax)	$257,950
Taxable income	150,000
Federal income tax liability	41,750
Interest income from tax-exempt bonds	15,000
Interest paid on loan incurred to purchase tax-exempt bonds	1,500
Life insurance proceeds received as a result of death of Heron’s president	150,000
Premiums paid on policy on life of Heron’s president	7,800
Excess of capital losses over capital gains	6,000
Retained earnings at beginning of year	375,000
Cash dividends paid	90,000

175. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Ques101
Osprey Company had a net loss of $200,000 from merchandising operations in 2011, its first year of operations. Mary, the sole owner of Osprey, works full time in the business. She has a large amount of income from other sources and is in the 35% marginal tax bracket irrespective of Osprey. Considering this information, compare the affect of Osprey’s loss to Mary under the various types of entity forms discussed in the chapter.

176. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Ques102
Shareholders of closely held C corporations frequently engage in transactions that produce a tax benefit to the corporations. In many cases, shareholders receive compensation for employment with closely held corporations, and such payments generate a deduction for the corporations. To avoid the double taxation effect, shareholders generally prefer these and other corporate deductible payments over dividend distributions. Explain how this strategy avoids double taxation, including examples of other shareholder-corporation transactions that could be used for such purpose. Also, discuss the possible pitfalls surrounding corporate payments to shareholders.

177. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Ques103
Nancy is a 40% shareholder and president of Robin Corporation, a regular corporation. The board of directors of Robin has decided to pay Nancy a $250,000 bonus for the year based on her outstanding performance. The directors want to pay the $250,000 as salary, but Nancy would prefer to have it paid as a dividend. If both Robin Corporation and Nancy are in a 35% marginal tax bracket irrespective of the treatment of the bonus, discuss which form of payment would be most beneficial for each party. (Ignore any employment tax considerations.)

179. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Ques105
Describe the Federal tax treatment of entities formed as limited liability companies.

180. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Ques106
Compare the taxation of C corporations with that of individual taxpayers. Provide several examples of similarities and differences in your discussion.

181. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Ques107
Explain the rules regarding the accounting periods available to corporate taxpayers.