Chris owns 70 percent of ABC Corporation. ABC Corporation had acquired land know

Question

Chris owns 70 percent of ABC Corporation. ABC Corporation had acquired land known as Parcel A in 1984 for $68,000 and held Parcel A for investment purposes. During the current taxable year, ABC Corporation sold Parcel A to Chris for $65,000 which amount was equal to the fair market value of Parcel A. Shortly after receiving Parcel A, Chris sold Parcel A to his friend from college for $73,000. How much gain or loss is realized and recognized by the respective parties as a result of each of the sales?

A.   ABC Corporation realized a loss of $3,000 and recognized a loss of $3,000 on the distribution; Chris realized a gain of $8,000 and recognized a gain of 8,000 on the sale.

B.   ABC Corporation realized a loss of $3,000 and recognized a loss of 3,000 on the distribution; Chris realized a gain of $5,000 and recognized a gain of $5,000.

C.   ABC Corporation realized a loss of $3,000 and recognized a loss of 0; Chris realized a gain of $8,000 and recognized a gain of $5,000.

D.  ABC Corporation realized a loss of $3,000 and recognized a loss of 0; Chris realized a gain of $5,000 and recognized a gain of$5,000.   

Question 2

For the current taxable year, HIJ Inc. had gross receipts from operations of $230,000, operating and other expenses of $310,000, and $120,000 of dividends that it received from a 45 percent-owned domestic corporation. For the current taxable year, HIJ Inc. has taxable income or a net operating loss of what amount?

A.   $8,000 taxable income.

B.    $40,000 taxable income.

C.     $56,000 net operating loss.

D.     $80,000 net operating loss.

Question 3

NOP Inc. had the following income and expenses during the current taxable year. Its income from operations was $250,000, its expenses from operations were $120,000, its dividends received (from a 30 percent-owned corporation)) were $80,000, and it made cash charitable contributions of $30,000
How much is NOP Inc.

Explanation / Answer

1)

B. ABC Corporation realized a loss of $3,000 and recognized a loss of 3,000 on the distribution; Chris realized a gain of $5,000 and recognized a gain of $5,000.

2)

A. $8,000 taxable income.

3)

B. $21,000.

4)

C. $320,000.

5)

C. 2026.

6)

D. $20,000 Section 1231 gain.

7)

B. $10,000.

8)

B. $25,000.

9)

A. $30,000 of gain was realized and recognized.

10)

B. $10,000.

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