ACC 455 Final Exam Spring of 2022

Identify which of following statements is true. A. check-the-box regulations permit an LLC to be taxed as a C corporation. B. Under check-the-box regulations, an LLC that has only two members (owners) default classification is as a partnership. C. Once an election is made to change its classification, an entity cannot change again for 60 months. D. All of statements are true. 10) Rose and Wayne form a new corporation. Rose contributes cash for 85% of stock and Wayne contributes services for 15% of stock. tax effect is A. Rose and Wayne are not required to recognize their realized gains. B. Wayne must report FMV of stock received as capital gain. C. Rose and Wayne must recognize their realized gains, if any. D. Wayne must report FMV of stock received as ordinary income. 11) Matt and Sheila form Krupp Corporation. Matt contributes property with a FMV of $55,000 and a basis of $35,000. Sheila contributes property with a FMV of $75,000 and a basis of $40,000. Matt sells his stock to Paul shortly after exchange. transaction will A. qualify with respect to Sheila under Sec. 351 whether Matt qualifies or not B. qualify under Sec. 351 if Matt can show sale to Paul was not part of a prearranged plan C. not qualify under Sec. 351 D. qualify under Sec. 351 only if an advance ruling has been obtained 12) For Sec. 351 purposes term property does not include A. inventory B. accounts receivable C. cash D. services rendered 13) Identify which of following statements is true. A. In computing an NOL for current year, a deduction is allowed for NOLs from previous years. B. An election to forgo an NOL carryback must be made on or before return due date (including extensions) for year in which NOL is incurred. C. A corporate NOL can be carried back 2 years and forward 15 years. D. All are false. 14) A new corporation may generally select one of following accounting methods with exception of A. retail method B. accrual method C. cash method D. hybrid method 15) Identify which of following statements is false. A. A new corporation can elect a fiscal year that runs from February 16 to February 15 of following year. B. A fiscal year may not end on December 31. C. A corporation's fiscal year generally must end on last day of month. D. A corporation's first tax year may not cover a full 12-month period. 16) Edison Corporation is organized on July 31. corporation starts business on August 10. corporation adopts a November 30 fiscal year end. following expenses are incurred during year: Date Type Amount 6-30 Attorneys fees associated with obtaining charter $10,000 7-10 Underwriter fees for stock sale 25,000 7-15 Transfer cost for property contributed to corporation for stock 3,000 6-30 Costs of organizational meetings 2,000 12-6 Legal fees to modify charter 4,000. What is maximum amount of organizational expenditures that can be deducted by corporation for its first tax year ending November 30? A. $5,156 B. $12,000 C. $16,000 D. $800 17) Maxwell Corporation reports following results: Gross income from operations $ 90,000 Dividends received from 18%-owned domestic corporation 70,000 Expenses 100,000 Maxwell's dividends-received deduction is A. $56,000 B. $49,000 C. $42,000 D. $70,000 18) Island Corporation has following income and expense items for year. Gross receipts from sales $60,000 Dividends received from 15%-owned domestic corporation 40,000 Expenses connected with sales 30,000. taxable income of Island Corporation is A. $47,000 B. $70,000 C. $100,000 D. $42,000 19) Which of following is not an adjustment in calculating AMTI? A. Production activities deduction B. regular tax NOL deduction C. Gain on installment sales of noninventory property D. difference between gains for AMTI and regular tax purposes 20) Tax-exempt interest income on state and local municipal bonds which are not a private activity is A. a negative adjustment in calculating alternative minimum taxable income (AMTI) B. a positive adjustment in calculating alternative minimum taxable income (AMTI) C. a tax preference item D. included in calculating ACE (adjusted current earnings) 21) Which of following statements about alternative minimum tax depreciation rules is correct? A. A 31.5-year recovery period is used when calculating commercial real property depreciation deduction for alternative minimum taxable income purposes. B. excess of gain reported on disposition of tangible personal property for income tax purposes over gain reported for alternative minimum tax purposes is a positive adjustment to taxable income in arriving at alternative minimum taxable income. C. MACRS depreciation rules are used to calculate depreciation deduction when calculating alternative minimum taxable income regardless of date property was placed in service. D. No depreciation adjustment is made when computing AMT for real property acquired after 1998. 22) Maxwell Corporation reports following results: Year Current E&P Distributions 2005 $6,000 $4,000 2006 5,000 1,000 2007 1,000 -0- Maxwell's dividends-received deduction is A. $5,000 B. $7,000 C. $0 D. $12,000 23) Grant Corporation sells land (a noninventory item) with a basis of $57,000 for $100,000. Nichole will be paid on an installment basis in five equal annual payments starting in current year. E&P for year of sale will be increased as a result of sale (excluding federal income taxes) by A. $43,000 B. $0 C. $8,600 D. $100,000 24) Identify which of following statements is false. A. At formation, a corporation's E&P depends on amount of capital contributed by shareholders. B. For E&P dividend distribution purposes, property as defined in Sec. 317(a) includes money. C. function of E&P is to provide a measure of a corporation's economic ability to pay dividends. D. Adjustments to taxable income when computing E&P do not include tax exempt interest.