ACC 565 Midterm Exam Guide

Question 1

Identify which of the following statements is false.                               

Question 2

Which of the following transactions does nothave the potential of creating a constructive dividend?                    

Question 3

The citation “Reg. Sec. 1.199-2” refers to                                   

Question 4

Bruce receives 20 stock rights in a nontaxable distribution. The stock rights have an FMV of $5,000. The common stock with respect to which the rights are issued has a basis of $4,000 and an FMV of $120,000. Bruce allows the stock rights to lapse. He can deduct a loss of  

Question 5

Identify which of the following statements is true.                                

Question 6

A corporation cannot reasonably accumulate earnings to                        

Question 7

Small case procedures of the U.S. Tax Court requires that the amount in dispute not exceed   

Question 8

For purposes of determining current E&P, which of the following items cannot be deducted in the year incurred?                          

Question 9

What are the consequences of a stock redemption to the distributing corporation?                   

Question 10

Under a plan of complete liquidation, Coast Corporation distributes land with a $300,000 adjusted basis and a $400,000 FMV to William, a 25% shareholder. William has a $200,000 basis in his Coast stock. The land is inventory in the hands of Coast Corporation. Coast Corporation must recognize                     

Question 11

The phrase “Entered under Rule 155” indicates that                               

Question 12

You need to locate a recent tax case that was tried in a Federal district court. The decision is an “unreported” decision. This means the decision was                               

Question 13

When using the Bardahl formula, an increase in accounts payable (while holding purchases and operating expenses constant) has which of the following effects on the working capital

Question 14

Which of the following steps, related to a tax bill, occurs first?                         

Question 15

Dexer Corporation is owned 70% by Amy and 30% by Brad. Dexer Corporation owns Eagle Corporation stock with a $50,000 adjusted basis and a $30,000 FMV. The stock is not disqualified property. As part of a complete liquidation, the Eagle Corporation stock is distributed to Amy. Amy’s basis in her Dexer stock is $40,000. Dexer Corporation will recognize                                

Question 16

Which of the following requirements must be met for a redemption to be treated as substantially disproportionate?                         

Question 17

During the course of an audit, a CPA discovers an error in a prior return. According to the Statements on Standards for Tax Services, the CPA should                              

Question 18

Which of the following is not a condition that permits a stock redemption to be treated as a sale?                        

Question 19

Carolyn transfers property with an adjusted basis of $50,000 and an FMV of $60,000 in exchange for Prime Corporation stock in a Sec. 351 transaction. Carolyn’s basis in the stock is                                 

Question 20

Tia owns 2,000 shares of Bass Corporation common stock with an $80,000 basis. Bass distributes a nontaxable preferred stock dividend. When the preferred stock is distributed, it has an FMV of $60,000 and the FMV of the 2,000 common stock shares is $180,000. The basis of the preferred stock is                          

Question 21

American Corporation acquires the noncash assets of Utech Corporation in exchange for $700,000 of its voting stock plus $50,000 of cash. Utech Corporation assets are worth $750,000. Utech Corporation does not distribute the stock and cash but instead holds the stock as an investment. Utech will use the American cash along with the cash it retained to start a new business. The transaction can be classified as a                           

Question 22

Dixie Corporation distributes $31,000 to its sole shareholder, Sally. At the time of the distribution, Dixie’s E&P is $25,000 and Sally’s basis in her Dixie stock is $10,000. Sally’s basis in her Dixie stock after the distribution is                             

Question 23

Tomika Corporation has current and accumulated earnings and profits of $0. Tomika distributes $10,000 to its sole shareholder, Alana. What are Tomika’s earnings and profits

Question 24

Which of the following items are tax preference items for purposes of arriving at alternative minimum taxable income?                           

Question 25

JLA is a U.S. shoe manufacturer. Its domestic production income is $1,000,000 and U.S. W-2 wages are $600,000. Taxable income before the domestic production deduction is $500,000. What is the amount of the production activities deduction? 


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