Question :
51. On July 1, 2014, Grey formed Arucaria Corporation. On that : 1313625
51. On July 1, 2014, Grey formed Arucaria Corporation. On that same date, Grey contributed $100,000 cash and transferred property with an adjusted basis of $60,000 to Arucaria in exchange for 3,000 shares of the corporation’s common stock. The property transferred had a fair market value of $75,000 on the date of the transfer. Arucaria Corporation had no other shares of common stock outstanding on July 1, 2014. As a result of this transaction, Grey’s basis in the stock and Arucaria Corporation’s basis in the property (other than the cash), respectively, are:
a. $160,000 and $60,000
b. $160,000 and $75,000
c. $175,000 and $60,000
d. $175,000 and $75,000
e. None of the above
ANSWER: a
RATIONALE: Grey’s basis = $100,000 + $60,000 Arucaria Corporation’s basis in the property transferred = $60,000
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-07 – LO:11-07
52. Terry forms the Camphor Corporation during 2014. She transfers property with a value of $700,000 to Camphor Corporation in exchange for 100 percent of the stock in the corporation. Terry’s basis in the property transferred was $400,000 and the corporation assumed a $275,000 mortgage on the property. If the fair market value of the stock received by Terry is $450,000, what is the corporation’s basis in the property received from Terry?
a. $125,000
b. $275,000
c. $400,000
d. $450,000
e. $700,000
ANSWER: c
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-07 – LO:11-07
53. Roberta and Sally formed the Alder Corporation on October 1, 2014. On the same date, Roberta paid $75,000 cash to Alder Corporation for 1,500 shares of the corporation’s common stock. Simultaneously, Sally received 100 shares of Alder Corporation’s stock for services rendered. How much should Sally include in her taxable income for 2014, and what will be the basis of her Alder Corporation stock?
?
Taxable Income Basis of Stock
a. ?
$0$0
?
?
b. ?
$0$5,000
?
?
c. ?
$5,000$0
?
?
d. ?
$5,000$5,000
?
?
e. None of the above
ANSWER: d
RATIONALE: $75,000 / 1,500 shares x 100 shares
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-07 – LO:11-07
54. On July 1, 2014, Robert forms the Yew Corporation. In exchange for 100 percent of the corporation’s stock, Robert contributes land with a fair market value of $100,000. Robert acquired the land 5 years ago at a cost of $30,000. At the date of the contribution, the land is subject to a $10,000 mortgage which the corporation assumes. What is the basis of the land to Yew Corporation?
a. $20,000
b. $30,000
c. $90,000
d. $100,000
e. None of the above
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-07 – LO:11-07
55. Harry forms the Nectarine Corporation during the 2014 tax year. To form the corporation, Harry transfers assets having a fair market value of $650,000 to Nectarine Corporation for 100 percent of the corporation’s stock. Harry’s adjusted basis in the assets transferred was $375,000 and Nectarine Corporation assumed a $200,000 mortgage on the assets. If the fair market value of the stock received by Harry is $450,000, what is his basis in the stock received from the corporation?
a. $175,000
b. $200,000
c. $375,000
d. $450,000
e. None of the above
ANSWER: a
RATIONALE: $175,000. $375,000 (basis of property transferred) – $0 (no boot received) + $0 (no gain recognized) – $200,000 (liabilities transferred)
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-07 – LO:11-07
56. The Sapote Corporation is a manufacturing corporation. The corporation has accumulated earnings of $450,000 and the corporation cannot establish a reasonable business need for any of that amount. What is the amount of the accumulated earnings tax, if any, that will be imposed on the corporation?
a. $45,000
b. $30,000
c. $50,000
d. $76,000
e. None of the above
ANSWER: b
RATIONALE: 15% ($450,000 – $250,000)
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-08 – LO:11-08
57. What is the maximum amount of accumulated earnings that a corporation is allowed to accumulate, without regard to business needs, before the accumulated earnings tax is imposed?
a. $150,000 for all corporations
b. $150,000 for nonservice corporations only
c. $250,000 for all corporations
d. $250,000 for nonservice corporations only
e. None of the above
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-08 – LO:11-08
58. The accumulated earnings tax, which is imposed on corporations for the accumulation of earnings in excess of reasonable business needs, does not apply to:
a. Closely-held corporations.
b. Widely-held corporations.
c. Corporations subject to the personal holding company tax.
d. Both b. and c.
e. All of the above.
ANSWER: c
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-08 – LO:11-08
59. Which of the following is not an adjustment or tax preference item for the corporate alternative minimum tax?
a. Certain tax-exempt bond intererest
b. Organization cost amortization
c. Accelerated depreciation on personal property
d. Percentage depletion in excess of the property’s adjusted basis
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-09 – LO:11-09
60. Choose the correct statement:
a. The corporate alternative minimum tax applies to all corporations including S corporations.
b. The exemption amount is phased out at a rate of $1.00 for every $1.00 by which the corporation’s alternative minimum taxable base exceeds $210,000.
c. The alternative minimum tax is imposed at 26 percent on the alternative minimum tax base up to $150,000 and 28 percent on the AMT base that is greater than $150,000.
d. The alternative minimum tax base is equal to the corporation’s regular taxable income increased or decreased for certain adjustments, increased by tax preference items, and decreased by the exemption amount.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-09 – LO:11-09
