uop ACC455- Final Examination

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1.A tax case cannot be appealed when initiated in the
U.S. Court of Federal Claims
U.S. Tax Court
U.S. Tax Court using the small cases procedures
None of these

a.
b.
c.
d.

2. Which of the following statements is true?
a.
Shareholders in a C corporation can use C corporation losses to offset shareholder income
from other sources.
b.
C corporation losses remain in the C corporation and can offset income from other years.
c.
C corporation shareholders are taxed based on their proportionate share of income.
d.
Distributions of C corporation income are not taxable.
Objective: Explain the process of applying check-the-box regulations in determining the business
entity election.
3.

Identify which of the following statements is true.
a.
The check-the-box regulations permit an LLC to be taxed as a C corporation.
b.
Under the check-the-box regulations, an LLC that has only two members (owners) must be
taxed as a partnership.
c.
Once an election is made to change its classification, an entity cannot change again for 60
months.
d.
All of these.

Objective: Determine the tax consequences of forming a corporation.
4. Brad forms Vott Corporation by contributing equipment which has a basis of $50,000 and a FMV of
$40,000 in exchange for Vott stock. Brad also contributes $5,000 in cash. If the transaction meets the
Sec. 351 control and ownership tests, what are the tax consequences to Brad?
a.
He recognizes a $5,000 loss.
b.
He recognizes a $5,000 gain and a $10,000 loss.
c.
He recognizes neither gain nor loss.
d.
He recognizes a $10,000 loss.

5. If a corporation’s charitable contributions exceed the deduction limitation in a particular year, the
excess
a.
is not deductible in any future year
b.
becomes a carryover to a maximum of 5 succeeding years
c.
may be carried back to the third preceding year
d.
is carried over indefinitely

6. Garth Corporation donates inventory having an adjusted basis of $40,000 and a FMV of $150,000 to
a qualified public charity. The inventory will be used by the charity for care of the ill. The maximum
charitable contribution deduction before consideration of the 10% limitation is
a.
$40,000
b.
$55,000
c.
$80,000
d.
$95,000

7. Identify which of the following statements is false.
a.
Tax-exempt interest on certain private activity bonds may be taxed under the alternative
minimum tax.
b.
Tax preference items and adjustments may either increase or decrease taxable income to
obtain AMTI.
c.
Depending on the date an asset is placed in service, depreciation may be an adjustment to
taxable income or a tax preference item for alternative minimum tax purposes.
d.
Different depreciation rules are used when computing taxable income and alternative minimum
taxable income.

8. 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 after the distribution?

a.
b.
c.
d.

$0
($10,000)
$10,000
None of these

9

Identify which of the following statements is true.
a.
The FMV of an obligation is used to determine the E&P reduction when a corporation
distributes the obligations to its shareholders.
b.
When appreciated property is distributed to shareholders, E&P must be increased by any gain
(net of taxes) recognized due to the property distribution.

c.
d.

When appreciated property is distributed in a nonliquidating distribution, the net effect on the
distributing corporation’s E&P is that it is reduced by the net of the FMV of the property distributed
minus the gain (net of federal income taxes) recognized due to the property distribution.
B and C above are true.

10. A corporation distributes land and the related liability in a nonliquidating distribution to a shareholder.
The land (a capital asset) has an adjusted basis of $70,000 and a FMV of $100,000 and is subject to
a mortgage of $120,000. The corporation must recognize
a.
$20,000 capital loss
b.
50,000 capital gain
c.
$70,000 capital gain
d.
no gain or loss

11. Identify which of the following statements is false.
a.
A stock redemption is treated as a sale or exchange only if the shareholder’s ownership of one
particular class of stock is terminated.
b.
An individual is not considered to own stock owned by a brother under the family attribution
rules of Sec. 318.
c.
An individual is considered to own the stock owned by his parents, children, spouse, and
grandchildren under the family attribution rules of Sec. 318.
d.
A person who has an option to purchase stock is considered to own the stock.
Week Four: Basics of Flow-Through Entities (S Corporations and Partnerships)

12. Identify which of the following statements is false.
a.
The election form can be signed by a person authorized to sign the S corporation tax return.
b.
An S election is filed by the corporation by using Form 2553 on or before the due date (without
regard for any extensions) for the corporate tax return for the tax year in question.
c.
An S corporation must file a tax return for any year in which the S corporation is in existence.
d.
The IRS can grant extensions of time of filing shareholder consents to the S election.\
.
13. Which one of the following special loss limitations apply to an S corporation?
a.
At-risk rules
b.
Passive activity limitation rules
c.
Hobby loss rules
d.
All of these apply.

14. An electing S corporation has a $30,000 ordinary loss for the nonleap year. On January 1, Beverly
and Sonya own equally all of the S corporation stock. On the 146th day of the year, Beverly gives her

one-half of the S corporation stock to her daughter Becky. How much of the $30,000 ordinary loss is
allocated to Sonya?
a.
$25,000
b.
$15,000
c.
$10,000
d.
$6,000

15.Identify which of the following statements is true.
a.
When unrealized receivables are distributed in a liquidating distribution, the basis of the
receivables will be increased.
b.
The basis of unrealized receivables and inventory distributed by a partnership in liquidation of
a partnership interest are never increased above their bases in the hands of the partnership.
c.
The basis of the partnership interest is apportioned between all of the assets received in a
liquidating distribution based on the relative FMVs of the assets.
d.
All are false.

16. If an S corporation inadvertently terminates its election, the IRS
a.
may permit the corporation to report as an S corporation even for the period that includes the
termination date.
b.
will not permit the corporation to restore its S election until the completion of a 5-year waiting
period.
c.
will permit restoration of the S election only if the event causing the termination was not within
the control of the corporation.
d.
will permit restoration of the S election if a majority of the shareholders consent to the
reinstatement.

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