Question 60. 60. Harry forms the Nectarine Corporation during the 2014 tax year.

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Question 60.60. Harry forms the Nectarine Corporation during the 2014 tax year. To form the corporation, Harry transfers assets having a FMV of $650,000 to Nectarine Corporation for 100% of the corporation's stock. Harry's adjusted basis in the assets transferred was $375,000 & Nectarine Corporation assumed a $200,000 mortgage on the assets. If the FMV of the stock received by Harry is $450,000, what is his basis in the stock received from the corporation? (Points : 1)         $175,000
        $200,000
        $375,000
        $450,000
        None of the other provided choices Question 61.61. The Sapote Corporation is a manufacturing corporation. The corporation has accumulated earnings of $450,000 & the corporation cannot establish a reasonable business need for any of that amount. What is the amount of the accumulated earnings tax, if any, that will be imposed on the corporation? (Points : 1)         $45,000
        $30,000
        $50,000
        $76,000
        None of the other provided choices Question 62.62. What is the maximum amount of accumulated earnings that a corporation is allowed to accumulate, without regard to business needs, before the accumulated earnings tax is imposed? (Points : 1)         $150,000 for all corporations
        $150,000 for nonservice corporations only
        $250,000 for all corporations
        $250,000 for nonservice corporations only
        None of the other provided choices Question 63.63. The accumulated earnings tax, which is imposed on corporations for the accumulation of earnings in excess of reasonable business needs, does not apply to: (Points : 1)         Closely-held corporations.
        Widely-held corporations.
        Corporations subject to the personal holding company tax.
        Both widely-held corporations & corporations subject to the personal holding company tax.
        All of the other provided choices. Question 64.64. Which of the following is not an adjustment or tax preference item for the corporate alternative minimum tax? (Points : 1)         Certain tax-exempt bond intererest
        Organization cost amortization
        Accelerated depreciation on personal property
        Percentage depletion in excess of the property's adjusted basis Question 65.65. Choose the correct statement: (Points : 1)         The corporate alternative minimum tax applies to all corporations including S corporations.
        The exemption amount is phased out at a rate of $1.00 for every $1.00 by which the corporation's alternative minimum taxable base exceeds $210,000.
        The alternative minimum tax is imposed at 26% on the alternative minimum tax base up to $150,000 & 28% on the AMT base that is greater than $150,000.
        The alternative minimum tax base is equal to the corporation's regular taxable income increased or decreased for certain adjustments, increased by tax preference items, & decreased by the exemption amount. Question 66.66. At which of the following IRS locations are tax returns processed? (Points : 1)         Regional offices
        IRS Campus Processing Sites
        Local offices
        National office
        None of the other provided choices Question 67.67. When a taxpayer makes all of his income from his job and various investments, which office of the IRS would likely investigate his return if it were audited? (Points : 1)         Wage & Investment Division (W&I)
        Large & Midsize Business Office
        Small Business Office
        Criminal Investigation Office
        None of the other provided choices of office would perform the audit Question 68.68. Which of the following is the most common type of audit for an individual taxpayer? (Points : 1)         Office audit
        Telephone audit
        Correspondence audit
        Field audit
        None of the other provided choices Question 69.69. A tax return with a large casualty loss would be most likely selected for audit through: (Points : 1)         The Discriminant Function System
        Information from an informant
        Information from another governmental agency
        The Taxpayer Compliance Measurement Program
        None of the other provided choices Question 60.60. Harry forms the Nectarine Corporation during the 2014 tax year. To form the corporation, Harry transfers assets having a FMV of $650,000 to Nectarine Corporation for 100% of the corporation's stock. Harry's adjusted basis in the assets transferred was $375,000 & Nectarine Corporation assumed a $200,000 mortgage on the assets. If the FMV of the stock received by Harry is $450,000, what is his basis in the stock received from the corporation? (Points : 1)         $175,000
        $200,000
        $375,000
        $450,000
        None of the other provided choices

Explanation / Answer

60. H's basis in the stock received from the corporation will be equal to the FMV of the stock on the date of transfer that is $450,000.

61. The accumulated earnings tax that will be imposed on the corporation should be computed as follows:

Accumulated earnings tax = (Accumulated earnings - Allowed accumulated earnings credit ) × 15%

Accumulated earnings tax = ($450,000 - $250,000) × 15% = $30,000

62. The maximum amount of accumulated earnings that a corporation is allowed to accumulate, without regard to business needs, before the accumulated earnings tax is imposed is $250,000.

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