Reference no: EM131105168

QUESTION 1

Which of the following indicates that a decision has precedential value for future cases?

A. Staredecicis

B. Golsendoctrine

C. En banc

D. Reenactment doctrine

E. None of the above

QUESTION 2

The Golsendoctrine applies to which court?

A. U.S. Tax Court

B. U.S. District Court

C. U.S. Court of Federal Claims

D. U.S. Supreme Court

E. Some other court

QUESTION 3

Interpret the following citation: 64-1 USTC ¶ 9618, aff'd in 344 F. 2d 966.

A. A U.S. Tax Court Small Cases Division decision that was affirmed on appeal.

B. A U.S. Tax Court decision that was affirmed on appeal.

C. A U.S. District Court decision that was affirmed on appeal.

D. A U.S. Circuit Court of Appeals decision that was affirmed on appeal.

E. None of the above.

QUESTION 4

A Memorandum decision of the U.S. Tax Court could be cited as:

A. T.C. Memo. 1990-650

B. 68-1 USTC ¶ 9200

C. 37 AFTR 2d 456

D. All of the above

E. None of the above

QUESTION 5

Bjorn owns a 60% interest in an S corporation that earned $150,000 in 2011. He also owns 60% of the stock in a C corporation that earned $150,000 during the year. The S corporation distributed $30,000 to Bjorn and the C corporation paid dividends of $30,000 to Bjorn. How much income must Bjorn report from these businesses?

A. $0 income from the S corporation and $30,000 income from the C corporation.

B. $90,000 income from the S corporation and $30,000 income from the C corporation.

C. $90,000 income from the S corporation and $0 income from the C corporation.

D. $30,000 income from the S corporation and $30,000 of dividend income from the C corporation.

E. None of the above

QUESTION 6

In 2011, Bluebird Corporation had net income from operations of $75,000. Further, Bluebird recognized a long-term capital loss of $30,000, and a short-term capital gain of $10,000. Which of the following statements is correct?

A. Bluebird Corporation may use the capital loss to offset the capital gain and must carry the net capital loss of $20,000 forward five years as a long-term capital loss.

B. Bluebird Corporation may deduct $13,000 of the capital loss in 2011 and may carry forward the remainder of the capital loss indefinitely to offset capital gains.

C. Bluebird Corporation will have taxable income in 2011 of $55,000.

D. Bluebird Corporation will have taxable income in 2011 of $75,000 and will have a net capital loss of $20,000 that can be carried back 3 years and forward 5 years.

E. None of the above

QUESTION 7

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

QUESTION 8

Lee, Inc., an S corporation, has taxable income of $15 million in 2011. Assume there are two shareholders, each in the top individual tax bracket. What is the maximum total DPAD tax savings for the S corporation shareholders?

A. None

B. $294,000

C. $472,500

D. $1,260,000

E. None of the above

QUESTION 9

Nickel Corporation has average gross receipts of $5.6 million, $4.6 million, and $4.7 million in 2009, 2010, and 2011, respectively. Nickel is:

A. Not subject to the corporate income tax

B. A small corporation with respect to the AMT

C. Subject to the AMT

D. Not a small corporation with respect to the AMT

E. None of the above

QUESTION 10

Which statement, if any, is false?

A. An S corporation is not subject to the corporate AMT.

B. A high level of investment in assets (e.g., equipment or structures) is a reason a company may be subject to the AMT.

C. Many of the adjustments that apply to individuals also apply to corporations.

D. The AMT is a separate tax system from the corporate income tax.

E. None of the above

QUESTION 11

Gander, a calendar year corporation, has a deficit in current E & P of $100,000 and a $290,000 positive balance in accumulated E & P. If Gander determines that a $500,000 distribution to its shareholders is appropriate at some point during the year, what is the maximum amount of the distribution that could potentially be treated as a dividend?

A. $0

B. $190,000

C. $240,000

D. $290,000

E. None of the above

QUESTION 12

Purple Corporation has accumulated E & P of $100,000 on January 1, 2011. In 2011, Purple has current E & P of $130,000 (before any distribution). On December 31, 2011, the corporation distributes $250,000 to its sole shareholder, Cindy (an individual). Purple Corporation's E & P as of January 1, 2012 is:

A. $0

B. ($20,000)

C. $100,000

D. $130,000

E. None of the above

QUESTION 13

In the current year, Dove Corporation (E & P of $1 million) distributes all of its property in a complete liquidation. Alexandra, a shareholder, receives land having a fair market value of $200,000. Dove Corporation had purchased the land as an investment three years ago for $150,000, and the land was distributed subject to a $100,000 liability. Alexandra took the land subject to the $100,000 liability. What is Alexandra's basis in the land?

A. $50,000

B. $100,000

C. $150,000

D. $200,000

E. None of the above

QUESTION 14

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

QUESTION 15

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

QUESTION 16

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

QUESTION 17

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

QUESTION 18

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.

A. $70,000

B. $60,000

C. $25,000

D. $20,000

QUESTION 19

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.

QUESTION 20

Generally, accrued foreign taxes are:

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.

QUESTION 21

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.

QUESTION 22

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?

A. $0

B. $10,500

C. $39,500

D. $50,000

QUESTION 23

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

D. Sales taxes

QUESTION 24

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?

A. One

B. Two

C. Three

D. Four

QUESTION 25

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.

QUESTION 26

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

QUESTION 27

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

QUESTION 28

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

QUESTION 29

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2?

A. Charitable contributions

B. Unreasonable compensation

C. Payroll tax penalty assessed

D. Domestic production activities deduction

E. None of the above

QUESTION 30

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?

A. $4 million

B. $5 million

C. $7.5 million

D. $10 million

E. Not required to file.