ACC 565 Midterm Exam Guide
Identify which of the following statements is false.
Which of the following transactions does nothave the potential of creating a constructive dividend?
The citation “Reg. Sec. 1.199-2” refers to
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
Identify which of the following statements is true.
A corporation cannot reasonably accumulate earnings to
Small case procedures of the U.S. Tax Court requires that the amount in dispute not exceed
For purposes of determining current E&P, which of the following items cannot be deducted in the year incurred?
What are the consequences of a stock redemption to the distributing corporation?
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
The phrase “Entered under Rule 155” indicates that
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
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
Which of the following steps, related to a tax bill, occurs first?
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
Which of the following requirements must be met for a redemption to be treated as substantially disproportionate?
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
Which of the following is not a condition that permits a stock redemption to be treated as a sale?
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
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
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
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
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
Which of the following items are tax preference items for purposes of arriving at alternative minimum taxable income?
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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