Mid-Term

A) A business need not be incorporated under state or federal law to be taxed as a corporation

B) Once an election is made to change its classification, an entity cannot change again for 60 months

C) Under the check-the-box regulations, an LLC that has only two members (owners) must be taxed as a partnership.

D) The check-the-box regulations permit an LLC to be taxed as a C corporation.

A) services rendered

B) cash

C) inventory.

D) accounts receivable.

A) increased by the FMV of boot received from the corporation.

B) decreased by the gain recognized by the transferor

C) increased by the gain recognized by the corporation

D) decreased by liabilities assumed by the corporation.

70000

50000

47000

100,000

a. cost incurred when issuing stock

expenses of organizational meetings

fees paid to the state of incorporation

legal cost incident to the creation of the corporation

A controlled group must apportion certain tax benefits among its members

Brown corporation owns 60% of Clark Corporation and 65% of Davis Corporation. Davis Corporation owns 10% of Clark Corporation, and Clark Corporation owns 10% of Davis Corporation. The remaining stock is owned by an individual shareholder. Brown, Davis, and Clark Corporations are a parent-subsidiary controlled group

The controlled group test is applied on December 31

There are three categories of control groups: parent-subsidiary, brother-sister, and combined

federal income tax refunds from prior years

life insurance proceeds where the corporation is the beneficiary

tax exempt interest income

all of the above

a zero basis in the land and a $60000 basis reduction in other assets

income recognition in the amount of 16000 to the corporation at the time of contribution

a zero basis in the land and 60000 ordinary income to the corporation 24 months after the time of contribution if the cash is not used to purchase assets

income recognition in the amount of 60000 to the corporation 12 months after the time of contribution