Multiple Choice Answers

Which of the following characteristics is the same for transfers of property to both a corporation and to a partnership in exchange solely for an ownership interest? (Points : 5)
The transferors must have control of the corporation or partnership after the transfer.
Liabilities assumed affect the owner’s basis in the entity’s business in the same manner.
Loss is not recognized.
The holding period for all of the assets transferred begins on the date of the transfer.
None of the characteristics are the same for both entities.

Trudi Corporation has a building that it needs to sell or exchange because of growth in its business. If Trudi sells the building, it will have a gain of $450,000. What is its current reduction in its taxes for this gain if it can exchange the building? The corporation has $1,000,000 of taxable income from operations for the current year. (Points : 5)
$90,000
$153,000
$175,500
$450,000
None of the above

The Shepherd Corporation has $40,000 of taxable income; $200,000 of positive adjustments; and a $10,000 preference item. What is its alternative minimum taxable income? (Points : 5)
$250,000
$235,000
$230,000
$225,000
None of the above

Twining Corporation has some land that it wants to trade for a building owned by Clopp Corporation. Clopp does not want to exchange the building because it wants to recognize its loss on the building. Twining, however, does not want to recognize its gain. What alternative(s) does Twining have? (Points : 5)
Twining can sell its land to a third party and take the money and purchase the building.
Twining can have a third party purchase the building and have the third party trade for the land.
Twining can complete a nonsimulataneous exchange within one year of identifying the desired property.
All of the above are acceptable alternatives.
None of the above is an acceptable alternative.

Willow Corporation exchanged land valued at $250,000 (adjusted basis = $175,000) for a building owned by Tree Corporation valued at $350,000 (adjusted basis = $200,000) and $50,000 cash. In addition, Willow assumed the $150,000 mortgage on Tree’s building. What are Willow and Tree’s realized gains or losses on the properties exchanged, respectively? (Points : 5)
$75,000, 0
$75,000, $150,000
$225,000, $150,000
$225,000, $200,000
None of the above

In early 2010, Conrad Corporation discovered that their bookkeeper had embezzled $30,000 over the last three years at a rate of approximately $10,000 per year. Conrad also suffered uninsured hurricane damage of $40,000 late in 2010 in a presidentially declared disaster area. If Conrad wants to deduct its losses at the earliest time possible, what are the amounts and year(s) of its loss deduction? (Points : 5)
2010 = $70,000
2009 = $30,000, 2009 = $40,000
2009 = $40,000, 2010 = $30,000
2008 = $10,000, 2009 = $10,000; 2010 = $50,000
None of the above

A corporation is subject to both the personal holding company tax and the accumulated earnings tax. Its regular taxable income is $200,000. Its adjusted taxable income for imposing the personal holding company tax is $170,000 and its taxable income for determining the accumulated earnings tax is $230,000. What is the corporation’s total tax liability? (Points : 5)
$65,620
$86,750
$95,750
$121,250
None of the above