ACCT 424 Week 2 Checkpoint

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ACCT 424 Week 2 Checkpoint

 1.Question :(TCO 2) Which, if any, is a characteristic of the PAD?
Student Answer: Not allowed as a deduction for AMT purposes
 Not allowed to an electric utility that generates, transmits, and retails to consumers
 Can be available to a contractor who does not own the property being constructed
 Not available when the property produced and sold includes an embedded service
 None of the above

 

 2.Question :(TCO 2) Maria Corporation manufactures and sells ceramic dinnerware. The company also sells dinnerware that is purchased from unrelated foreign producers. During the tax year 2011, Maria had a U.S. profit of $1.2 million (QPAI) and a profit from the imported merchandise of $100,000. Which is Maria’s DPAD?
Student Answer: $0
 $36,000
 $72,000
 $108,000
 None of the above

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 3.Question :(TCO 2) Gem Corporation, a calendar-year taxpayer, has AMTI (before adjustment for adjusted current earnings) of $6 million. If Gem Corporation’s ACE is $15 million, its tentative minimum tax is
Student Answer: $4.2 million.
 $3.45 million.
 $2.55 million.
 $2.02 million.
 None of the above

 

 4.Question :(TCO 3) As of January 1, Spruce Corporation has a deficit in accumulated E & P of $37,500. For tax year, current E & P (all of which accrued ratably) is $20,000 (prior to any distribution). On July 1, Spruce Corporation distributes $25,000 to its sole, noncorporate shareholder. The amount of the distribution that is a dividend is
Student Answer: $0.
 $20,000.
 $25,000.
 $37,500.
 None of the above

 

 5.Question :(TCO 3) Balsa Corporation distributes land with a fair market value of $75,000 and an adjusted basis of $25,000. The land is subject to a liability of $30,000. Which is the total effect of the distribution on the E & P of Balsa?
Student Answer: Balsa’s E & P is neither increased nor decreased.
 Balsa’s E & P is increased by $5,000.
 Balsa’s E & P is increased by $50,000.
 Balsa’s E & P is reduced by $75,000.
 None of the above

 

 6.Question :(TCO 3) Which statement is incorrect with respect to determining current E & P?
Student Answer: All tax-exempt income should be added back to taxable income.
 Dividends received deductions should be added back to taxable income.
 Charitable contributions in excess of the 10% of taxable income limit should be subtracted from taxable income.
 Federal income tax refunds should be added back to taxable income.
 None of the above

 

 7.Question :(TCO 3) Walnut Corporation, a calendar-year taxpayer, has taxable income of $110,000 for the year. In reviewing Walnut’s financial records, you discover the following occurred this year.

Federal income taxes paid: $25,000
Net operating loss carry forward deducted currently: $25,000
Gain recognized this year on an installment sale from a prior year: $12,000
Depreciation deducted on tax return (ADS depreciation would have been $8,000): $15,000
Interest income from Wisconsin state bonds: $37,000

Walnut Corporation’s current E & P is

Student Answer: $73,000.
 $138,000.
 $142,000.
 $166,000.
 None of the above

 

 8.Question :(TCO 4) Five years ago, Eleanor transferred property she had used in her sole proprietorship to Blue Corporation for 100 shares of Blue Corporation in a transaction that qualified under § 351. The assets had a tax basis to her of $200,000 and a fair market value of $350,000 on the date of the transfer. In the current year, Blue Corporation (E & P of $1 million) redeems 30 shares from Eleanor for $225,000 in a transaction that does not qualify for sale or exchange treatment. With respect to the redemption, Eleanor will have a
Student Answer: $165,000 dividend.
 $165,000 capital gain.
 $225,000 dividend.
 $225,000 capital gain.
 None of the above

 

 9.Question :(TCO 4) Hawk Corporation has 300 shares of stock outstanding: Marina owns 60 shares, Kent owns 90 shares, and Tom owns 75 shares. Blackbird Partnership owns the remaining 75 shares of stock in Hawk Corporation. Marina, Kent, and Tom, all unrelated, are equal partners of Blackbird Partnership. With respect to the stock attribution rules under § 318,
Student Answer: Marina owns, directly and indirectly, 85 shares in Hawk Corporation.
 Tom owns, directly and indirectly, 150 shares in Hawk Corporation.
 Kent owns, directly and indirectly, 90 shares in Hawk Corporation.
 Blackbird Partnership owns, directly and indirectly, 150 shares in Hawk Corporation.
 None of the above

 

 10.Question :(TCO 4) The stock in Lark Corporation is owned equally by Olaf and his son Pete. In a liquidation of the corporation, Lark Corporation distributes to Olaf land that it had purchased 3 years previously for $550,000. The property has a fair market value on the date of distribution of $400,000. Later, Olaf sells the land for $420,000. Which loss will Lark Corporation recognize with respect to the distribution of the land?
Student Answer: $0
 $20,000
 $130,000
 $150,000
 None of the above

 

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