Corporations

Question 1

Which of the following entities has the most flexibility in choosing an accounting period?
A. Personal service corporation
B. Partnership
C. S Corporation
D. C Corporation

Answer 1

D. C Corporation

Question 2

The rules for the formation of an S Corporation are the same as for a C Corporation: TRUE or FALSE?

Answer 2

TRUE

Question 3

C Corporations with greater than $25 million average annual gross receipts may use either cash basis or accrual basis of accounting for tax purposes: TRUE or FALSE?

Answer 3

FALSE. Must use Accrual Basis of Accounting for Tax purposes

Question 4

A corporate charitable deduction that exceeds the limit for deduction in one year can be C/F and C/B as follows:
A. 5 years C/F, 5y C/B
B. No C/F, 5y C/B
C. No C/F, No C/B
D. 5y C/F, No C/B

Answer 4

D. 5y C/F, No C/B

Question 5

Organization costs of a corporation may be amortized over a period of not less than how many months?

Answer 5

180 months

Question 6

TP may elect to deduct organization costs of a corporation in Year 1 up to how much, subject to certain limitations?

Answer 6

$5,000

Question 7

The corporate DRD requires that the investor corporation must own the investee;s stock for a specified minimum holding period of more than how many days?

Answer 7

More than 45 days

Question 8

Excess charitable contribution over the limit cannot be carried-back but can be C/F for how many years?

Answer 8

5 years

Question 9

For start-up costs, the amount that can be immediately expensed is phased out dollar for dollar if the business incurs more than how much of start-up costs?

Answer 9

$50,000

Question 10

2 Criteria for a Personal Holding Company:

1) Stock ownership by 5 or fewer people at more than how many %?
2) at least what % of AOGI is composed of certain investment income (e.g., interest, dividends, etc.)?

Answer 10

50% ownership test

60% income test

Question 11

For the PHC income test, interest earned on tax-exempt obligations is included: TRUE or FALSE?

Answer 11

FALSE. Not included in AOGI.

Question 12

A personal holding corporation (PHC) is primarily involved in the performance of one of the following fields: accounting, law, consulting, engineering, architecture, health, and actuarial science: TRUE or FALSE?

Answer 12

FALSE.

A personal service corporation (PSC), not a personal holding corporation (PHC)

Question 13

All business expenses for operating an illegal business are not permitted as deduction: TRUE or FALSE?

Answer 13

FALSE.

Cost of merchandise allowed as a deduction to determine the gain.

Question 14

No underpayment of estimated tax penalty will be imposed if the total underpayment of tax for the year is less than what amount?

Answer 14

$500

Question 15

The usual result to the shareholders of a distribution in complete liquidation of a corporation is a: CAPITAL GAIN/LOSS or ORDINARY GAIN/LOSS?

Answer 15

CAPITAL GAIN/LOSS

Question 16

What is the maximum Section 1244 loss a single TP can deduct in any year and is it ordinary or capital?

Answer 16

$50,000 ordinary loss

Question 17

Losses in excess of the threshold for Section 1244 stock is considered CAPITAL or ORDINARY?

Answer 17

Capital loss

Question 18

When a C-Corp distributes assets to its shareholders in a non-liquidating distribution, losses are deductible: TRUE or FALSE?

Answer 18

FALSE. Losses are not deductible.

Question 19

A dividend paid in property other than money is taxable to an individual taxpayer to the extent of the property’s FMV at all times: TRUE or FALSE?

Answer 19

FALSE.

Not in excess of the current and accumulated E&P

Question 20

Section 1244 qualifying stock losses is available to both original and subsequent owners: TRUE or FALSE?

Answer 20

FALSE. Original owners only.

Question 21

A stock redemption that is proportionate with respect to the shareholder is treated as an exchange of stock: TRUE or FALSE?

Answer 21

FALSE. Treated as a dividend.

Question 22

C corporations are allowed a maximum charitable contribution deduction of how much % of taxable income?

Answer 22

10% of taxable income

Question 23

When a corporation’s stock is sold or becomes worthless, an original stockholder can be treated as having an ordinary loss (fully deductible), instead of a capital loss, up to what amount for single and for married filing jointly for the year? Any loss(es) in excess of this amount is (are) a capital loss.

Answer 23

$50,000 for single

$100,000 if married filing jointly

Question 24

A personal holding company deducts which of the following in computing undistributed personal holding company income:
A. Federal income taxes
B. Net long-term capital gain less related federal income taxes
C. Neither of them
D. Both of them

Answer 24

D. Both of them

Question 25

A stock redemption that is proportionate with respect to the shareholder is treated as a ordinary income to the redeeming shareholder: TRUE or FALSE

Answer 25

FALSE.

Treated as a dividend

Question 26

A corporation’s capital loss carryback or carryover is always treated as a long-term capital loss: TRUE or FALSE

Answer 26

FALSE.

Short-term capital loss