Solved by verified expert :128. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest54
Patrick, an attorney, is the sole shareholder of Gander Corporation. Gander is
a personal service corporation with a fiscal year ending September 30. The
corporation paid Patrick a salary of $294,000 during its fiscal year ending
September 30, 2011. How much salary must Gander pay Patrick during the period
October 1 through December 31, 2011, to permit the corporation to continue to
use its fiscal year without negative tax effects?
a.
$0.
b. $73,500.
c. $220,500.
d. $294,000.
e. None of the above.
129. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest55
Jason, an architect, is the sole shareholder of Purple Corporation, a personal
service corporation. The corporation paid Jason a salary of $225,000 during its
fiscal year ending October 31, 2011. How much salary must Purple pay Jason
during the period November 1 through December 31, 2011, to permit the
corporation to continue to use its fiscal year without negative tax effects?
a.
$18,750.
b. $37,500.
c. $187,500.
d. $225,000.
e. None of the above.
130. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest56
Falcon Corporation, a C corporation, had gross receipts of $3 million in 2008,
$7 million in 2009, and $6 million in 2010. Hawk Corporation, a personal
service corporation (PSC), had gross receipts of $3 million in 2008, $5 million
in 2009, and $4 million in 2010. Which of the corporations will be allowed to
use the cash method of accounting in 2011?
a.
Neither Falcon Corporation nor Hawk Corporation.
b. Both Falcon Corporation and Hawk
Corporation.
c. Falcon Corporation only.
d. Hawk Corporation only.
e. None of the above.
131. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest57
Ivory Corporation, a calendar year, accrual method C corporation, has two cash
method, calendar year shareholders who are unrelated to each other. Craig owns
55% of the stock, and Oscar owns the remaining 45%. During 2011, Ivory paid a
salary of $200,000 to each shareholder. On December 31, 2011, Ivory accrued a
bonus of $50,000 to each shareholder. Assuming that the bonuses are paid to the
shareholders on February 1, 2012, compute Ivory Corporation’s 2011 deduction
for the above amounts.
a.
$0.
b. $250,000.
c. $400,000.
d. $450,000.
e. $500,000.
132. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest58
On December 31, 2011, Peregrine Corporation, an accrual method, calendar year
taxpayer, accrued a performance bonus of $100,000 to Charles, a cash basis,
calendar year taxpayer. Charles is president and sole shareholder of the
corporation. When can Peregrine deduct the bonus?
a.
In 2011, if the bonus was authorized by the Board of Directors and payment was
made on or before March 15, 2012.
b. In 2012, if payment was made at any
time during that year.
c. In 2011, if payment was made on or
before March 15, 2012.
d. In 2012, but only if payment was made
on or before March 15, 2012.
e. None of the above.
133. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest59
Bear Corporation has a net short-term capital gain of $35,000 and a net
long-term capital loss of $200,000 during 2011. Bear Corporation has taxable
income from other sources of $600,000. Prior years’ transactions included the
following:
2007
Net short-term capital gain
$45,000
2008
Net long-term capital gain
20,000
2009
Net short-term capital gain
55,000
2010
Net long-term capital gain
30,000
Compute the amount of Bear’s capital loss carryover to 2012.
a.
$0.
b. $60,000.
c. $105,000.
d. $165,000.
e. $200,000.
134. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest60
In 2011, Bluebird Corporation had net income from operations of $75,000.
Further, Bluebird recognized a long-term capital loss of $30,000, and a
short-term capital gain of $10,000. Which of the following statements is
correct?
a.
Bluebird Corporation may use the capital loss to offset the capital gain and
must carry the net capital loss of $20,000 forward five years as a long-term
capital loss.
b. Bluebird Corporation may deduct $13,000
of the capital loss in 2011 and may carry forward the remainder of the capital
loss indefinitely to offset capital gains.
c. Bluebird Corporation will have
taxable income in 2011 of $55,000.
d. Bluebird Corporation will have
taxable income in 2011 of $75,000 and will have a net capital loss of $20,000
that can be carried back 3 years and forward 5 years.
e. None of the above.
135. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest61
Jade Corporation, a C corporation, had $100,000 operating income and $40,000
operating expenses during the year. In addition, Jade had a $2,000 long-term
capital gain and a $10,000 short-term capital loss. Compute Jade’s taxable
income for the year.
a.
$52,000.
b. $57,000.
c. $60,000.
d. $62,000.
e. None of the above.
136. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest62
Beige Corporation, a C corporation, purchases a warehouse on December 4, 2002,
for $500,000. Straight-line depreciation is taken in the amount of $104,701
before the property is sold on February 8, 2011, for $600,000. What is the
amount and character of the gain recognized by Beige on the sale of the realty?
a.
Ordinary income of $0 and § 1231 gain of $204,701.
b. Ordinary income of $104,701 and §
1231 gain of $100,000.
c. Ordinary income of $40,940 and § 1231
gain of $163,760.
d. Ordinary income of $20,940 and § 1231
gain of $183,761.
e. None of the above.
137. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest63
During the current year, Thrasher, Inc., a closely held personal service
corporation, has $67,500 of active business income, $52,500 of portfolio
income, and $120,000 of passive loss. How much of the passive loss can Thrasher
deduct in the current year?
a.
$0.
b. $52,500.
c. $67,500.
d. $120,000.
e. None of the above.
