Acct 424 Week 8 Final Exam Answers

ACCT 424 Week 8 Final Exam Answers

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ACCT 424 Week 8 Final Exam Answers

1. (TCO 1) Hunter and Warren form Tan Corporation. Hunter transfers equipment (basis of $210,000 and fair market value of $180,000), and Warren transfers land (basis of $15,000 and fair market value of $150,000) and $30,000 cash. Each receives 50% of Tan’s stock. Which happens as a result of these transfers? (Points : 5)

Hunter has a recognized loss of $30,000; Warren has a recognized gain of $135,000.

Neither Hunter nor Warren has any recognized gain or loss.

Hunter has no recognized loss; Warren has a recognized gain of $30,000.

Tan Corporation has a basis in the land of $45,000.

None of the above

2. (TCO 1) Samantha transferred land worth $200,000 (basis of $40,000) to Lava Corporation, an existing entity, for 300 shares of its stock. Lava Corporation has two other shareholders, Timothy and Brett, each of whom holds 50 shares. Which happens with respect to the transfer? (Points : 5)

Samantha has no recognized gain.

Lava Corporation has a basis of $200,000 in the land.

Samantha has a basis of $200,000 in her 300 shares in Lava Corporation.

Both B and C

None of the above

3. (TCO 2) Pelican Inc., a closely held corporation (not a PSC), has a $350,000 loss from a passive activity, $135,000 of active income, and $160,000 of portfolio income. How much is Pelican’s taxable income? (Points : 5)

($55,000)

$0

$135,000

$295,000

$160,000

4. (TCO 2) Silver Corporation has average gross receipts of $5.7 million, $4.6 million, and $4.8 million for the last three years, respectively. Silver is _____. (Points : 5)

not subject to the corporate income tax

a small corporation with respect to the AMT

not subject to the AMT

not a small corporation with respect to the AMT

None of the above

5. (TCO 3) As of January 1, Everest Corporation has a deficit in accumulated E & P...