Solved by verified expert :165. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest91
Shaw, an architect, is the sole shareholder of Shaw Corporation, a professional
association. The corporation paid Shaw a salary of $255,000 during its fiscal
year ending October 31, 2011.
a.
How much salary must Shaw Corporation pay Shaw during the
period November 1 through December 31, 2011, to enable the corporation to
continue to use its fiscal year without negative tax effects?
b.
If Shaw Corporation had taxable income of $95,000 for the year
ending October 31, 2011, what is its tax liability?
166. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest92
During the current year, Lavender Corporation, a C corporation in the business
of manufacturing tangible research equipment, made charitable contributions to
qualified organizations as follows:
·
Research equipment (basis of $70,000, fair market value of
$110,000), held as inventory, to a qualified educational organization that
uses the property for research training. The inventory was produced by
Lavender earlier in the current year.
·
Stock (basis of $30,000, fair market value of $65,000) in
Olive Corporation, held for seventeen months as an investment, to United Way.
(United Way plans on selling the stock.)
·
Land (basis of $180,000, fair market value of $220,000), held
for three years as an investment, to State University. (State University
plans on using the land for new dormitories.)
Lavender Corporation’s taxable income (before any charitable contribution
deduction) is $2.5 million.
a.
What is the total amount of Lavender’s charitable
contributions for the year?
b.
What is the amount of Lavender’s charitable contribution
deduction in the current year, and what happens to any excess charitable
contribution, if any?
167. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest93
On December 30, 2011, the board of directors of Gull Corporation, a calendar
year, accrual method C corporation, authorized a contribution of $50,000 to a
qualified charitable organization. For purposes of the taxable income
limitation applicable to charitable deductions, Gull has taxable income of
$420,000 and $370,000 for 2011 and 2012, respectively. Describe the tax
consequences to Gull Corporation under the following independent situations.
a.
The $50,000 donation is made on February 21, 2012, by Gull
Corporation.
b.
The $50,000 donation is made on April 15, 2012, by Gull
Corporation.
168. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest94
During the current year, Quartz Corporation (a calendar year C corporation) has
the following transactions:
Income from operations
$450,000
Expenses from operations
500,000
Dividends received from ABC Corporation
100,000
Quartz owns 15% of ABC Corporation’s stock. How much is Quartz Corporation’s
taxable income (loss) for the year?
169. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest95
During the current year, Coyote Corporation (a calendar year C corporation) has
the following transactions:
Income from operations
$260,000
Expenses from operations
285,000
Dividends received from Roadrunner Corporation
115,000
a.
Coyote owns 5% of Roadrunner Corporation’s stock. How much is
Coyote Corporation’s taxable income (loss) for the year?
b.
Would your answer change if Coyote owned 25% of Roadrunner
Corporation’s stock?
