Question :
41. Ficus, Inc. began business March 1, 2014, and elected to : 1313624
41. Ficus, Inc. began business on March 1, 2014, and elected to file its income tax return on a calendar-year basis. The corporation incurred $800 in organizational expenditures. Assuming the corporation does not elect to expense but chooses to amortize the costs over 180 months, the maximum allowable deduction for amortization of organizational expenditures in 2014 is:
a. $4.44
b. $44.44
c. $53.28
d. $800.00
e. None of the above
ANSWER: b
RATIONALE: $800 / 180 months × 10 months
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-03 – LO:11-03
42. For the year ended December 31, 2014, Prunus, Inc., reported net income before federal income tax expense of $800,000 per the corporation’s books. This figure included the following items:
Interest income on tax-exempt municipal securities$30,000
Loss on sale of land acquired in 1985 as an investment$40,000
Interest expense on loan to purchase tax-exempt municipal securities$10,000
What is the taxable income of Prunus, Inc. for 2014?
a. $800,000
b. $820,000
c. $830,000
d. $870,000
e. None of the above
ANSWER: b
RATIONALE: $800,000 – $30,000 + $40,000 + $10,000
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-04 – LO:11-04
43. Which of the following items is not generally a schedule M-1 adjustment?
a. Net capital losses
b. Interest on tax-exempt bonds
c. Federal income tax expense
d. Interest expense on a loan to purchase municipal bonds
e. All of the above are M-1 adjustments
ANSWER: e
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-04 – LO:11-04
44. In general, estimated payments for calendar-year corporations are due on:
a. March 15, June 15, September 15, and December 15.
b. March 15, June 15, September 15, and January 15 of the following year.
c. April 15, June 15, September 15, and December 15.
d. April 15, June 15, September 15, and January 15 of the following year.
ANSWER: c
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-05 – LO:11-05
45. Which of the following is false in regards to filing requirements?
a. Corporations file their tax returns on Form 1120.
b. An automatic 6-month extension can be obtained by a corporation by filing Form 7004.
c. Filing Form 7004 provides a 6-month extension for paying the corporation’s tax due. A corporation can wait to pay its tax liability without penalty when the return is filed.
d. None of the above is false.
ANSWER: c
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-05 – LO:11-05
46. For its year ended December 31, 2014, Cupressa Corporation, an S corporation, had net income of $216,000 which included $180,000 of ordinary income from operations and a $36,000 net long-term capital gain. During 2014, a total of $90,000 was distributed to the corporation’s nine equal shareholders, all of whom are on a calendar-year tax basis. For 2014, each shareholder should report:
a. $10,000 ordinary income
b. $20,000 ordinary income
c. $20,000 ordinary income and $4,000 net long-term capital gain
d. $24,000 ordinary income
e. None of the above
ANSWER: c
RATIONALE: Ordinary income = $180,000 / 9 shareholders Long-term capital gain = $36,000 / 9 shareholders
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-06 – LO:11-06
47. Which of the following corporations is allowed to make an S corporation election?
a. A U.S. owned and operated corporation with two individual owners.
b. A U.S. corporation owned by a Brazilian corporation.
c. A U.S. owned and operated corporation with 7,000 separate shareholders.
d. None of the above could be an S corporation.
ANSWER: a
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-06 – LO:11-06
48. Which of the following statements is not true of S corporations?
a. S corporations are corporations that receive tax treatment similar to that given partnerships.
b. Section 1231 gains and losses pass through separately to stockholders of an S corporation.
c. The amount of S cocporation losses that a shareholder of an S corporation may report on his or her tax return is limited to the basis of the stock plus any loans made by the shareholder to the corporation.
d. If a taxpayer purchases stock in an S corporation from another shareholder during the year, the new shareholder may report the entire amount of any loss for the year attributable to the shares purchased.
e. If a shareholder acquires 40 percent of the stock of an S corporation, the new shareholder cannot cause the corporation to lose its S corporation election.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-06 – LO:11-06
49. Which of the following is not a requirement for qualification as an S corporation?
a. The corporation must be a domestic corporation.
b. The corporation must have 25 or fewer shareholders.
c. The corporation must have only one class of stock outstanding.
d. The shareholders of the corporation must not be nonresident aliens.
e. None of the above.
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-06 – LO:11-06
50. Rob, Bill, and Steve form Big Company. Rob performs $45,000 of services for his shares of the company. Bill transferred property with a basis of $5,000 for $75,000 of stock. Steve contributes cash of $100,000 for his shares. Which of the three must recognize income in the year of the formation?
a. Rob
b. Rob, Bill
c. Bill
d. Steve, Bill
e. Steve, Rob
ANSWER: a
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-07 – LO:11-07
