Please answer the following as accurately as possible.
1. Common kinds of distributions by a corporation to shareholders are:
A. Ordinary dividends.
B.
Capital gain distribution.
C.
Nontaxable distribution.
D. All
of the above.
2. Edwards owns 5 of the 1,000 outstanding shares of Wasco, Inc. stock. Edward purchased his 5 shares in 2003 for $500 per share. During 2008, Wasco, Inc. stock trades at a high of $2,000 per share. At the end of 2008, Wasco, Inc. has earnings and profits of $1,000,000. Wasco, Inc. redeems all of Edward's 5 shares at the end of 2008 for $1,500 per share. What amount of capital gain in 2008 must Edward report from the redemption of his Wasco, Inc. stock?
A.
$2,500.
B. $0.
C. $7,500.
D.
$5,000.
3. In 2003, Ralph received 10 shares of White Corporation stock as a gift from his father. Ralph's father had originally paid $10 per share for this stock. The stock was trading for $20 per share at the time of the gift. In 2006, Ralph purchased an additional 20 shares of White Corporation stock for a price of $30 per share. Ralph was charged a $20 transaction fee on this purchase. In October of 2008, Ralph sold 20 shares of his White Corporation stock. Ralph cannot adequately identify the shares he disposed of. What is Ralph's basis in the White Corporation shares he still owns?
A. $100.
B.
$200.
C.
$310.
D.
$360.
4. In 2004, Mark purchased 100 shares of Roman, Inc. for $10 per share. In 2008 Roman, Inc. completely liquidated and distributed $8,000 to Mark. Mark must report income from this distribution as:
A. Ordinary other income.
B.
Dividends.
C.
Capital gains.
D.
Return of capital.
5. The basis of property you buy is usually its cost. In determining the acquisition basis in C corporation stock, a shareholder must know:
A. The amount paid in cash or property.
B. The
amount paid in cash and debt obligations.
C.
The value of provided services and debt obligations assumed.
D. All
of the above.
6. Warren purchased stock in 2006 for $10,000. In 2007 Warren sold this stock to his sister Gail for $8,000. In 2008 Gail sold this stock to an unrelated party for $11,000. How much gain must Gail recognize in 2008 on the sale of this stock?
A.
$0.
B. $1,000.
C. $2,000.
D.
$3,000.
7. Arnold acquired 10 shares of Klesco, Inc. stock in 2004 for $50 per share. Klesco, Inc. decided in 2008 to reacquire all of its outstanding stock, which it did for $200 per share. What amount of capital gain in 2008 must Arnold report on the redemption of his Klesco, Inc. stock?
A. $0.
B.
$500.
C.
$1,500.
D.
$2,000.
8. Sandra sold her Lavender Corporation stock to her mother Beth for $8,000. Sandra's cost basis in the stock was $15,000. Beth later sold this stock to Harry, an unrelated party, for $20,000. What is Sandra's recognized gain or loss?
A. $2,000.
B.
$7,000.
C.
$7,500.
D.
$-0-.
9. Wargo Corporation has two equal shareholders, Karen and Bob. Each shareholder owns 10 shares of Wargo stock and has owned the stock for several years. Each share has a $100 basis and a $150 FMV. Wargo, which has sufficient E&P, redeems 5 shares from Bob at the $150 FMV. What income, if any, does Bob recognize as a result of the redemption?
A. $750.
B. $250.
C.
$500.
D. $1,000.
10. Which of the following is an example of nonqualified preferred stock in a Section 351 transactions?
A. The holder of the stock has the right to require the issuer or a related
person to redeem or buy the stock.
B. The issuer of the stock is required to redeem or buy the stock.
C. The dividend rate on the stock varies with reference to interest rates,
commodity process, or similar indices.
D. All of the above.
11. Karen transferred property with an adjusted basis of $45,000 and fair market value of $50,000 to Holiday Corporation in exchange for 65% of Holiday Corporation's only class of stock. At the time of the transfer, the stock Karen received has a fair market value of $55,000. What is Holiday Corporation's basis in the property after the exchange?
A. $0.
B.
$45,000.
C.
$55,000.
D.
$60,000.
12. Robert sold his Lebec Corporation stock to his sister Karen for $8,000. Robert's cost basis in the stock was $15,000. Karen later sold this stock to Dana, an unrelated party, for $15,000. What is Karen's realized gain?
A. $500.
B. $7,000.
C. $7,500.
D. $0.
13. Frank sold his Ranier Corporation stock to his sister Bernie for $8,000. Frank's cost basis in the stock was $15,000. Bernie later sold this stock to Wendy, an unrelated party, for $15,000. What is Bernie's recognized gain or loss?
A. $500.
B. ($7,000).
C. ($7,500).
D. $0.
14. A corporation can accumulate its earnings for a possible expansion or other bona fide business reasons. However, if a corporation allows earnings to accumulate beyond the reasonable needs of the business, it may be subject to an accumulated earnings tax of
A.
20%.
B. 25%.
C. 15%.
D.
None
of the above.
15. You must treat certain transactions that increase a shareholder's proportionate interest in the earnings and profits or assets of a corporation as if they were distributions of a stock or stock rights.
True False
16. If a corporation cancels a shareholder's debt without repayment by the shareholder, the amount canceled is
A.
Not taxable by the shareholder.
B. Treated as a distribution to the shareholder.
C. Forgiven and not treated as a distribution.
D.
Treated as a gift.
17. The amount of a distribution is generally the amount of any money paid to the shareholder plus the fair market value (FMV) of any property transferred to the shareholder. However, this amount is reduced (but not below zero) by
A.
Any liability of the corporation the shareholder assumes in connection with the
distribution.
B. Any liability to which the property is subject immediately before the
distribution.
C. Any liability to which the property is subject immediately after the
distribution.
D. All
of the above.
18. Bob Moon Forms Moon Enterprises LLC (Limited Liability Company) during the year. What form must Moon Enterprises LLC file in order to elect to be taxed as a C corporation?
A. Form 1065 (U.S. Partnership Tax Return).
B.
Form 8832 (Entity Classification Election).
C. Form 1120 (U.S. Corporation Income Tax Return).
D. Form 7004 (Application for Extension of time to file for Corporations).
19. ABC Corporation is dissolved on July 9, 2008. What is the due date, without extensions, for filing of the final corporate income tax return?
A. March
15, 2009.
B. December 31, 2008.
C. October 15, 2008.
D.
October 9, 2008.
20. The corporation's basis of property contributed to capital by a shareholder is
A. Zero.
B. The same as the basis the shareholder had in the property.
C. Not taxable to the corporation.
D.
None of the above.