Tax Chapter 13 Questions

Topics: Taxation in the United States, Taxation, Tax Pages: 28 (7535 words) Published: April 1, 2015
True / False – Chapter 13
Maria defers $100 of gain realized in a section 351 transactions. The stock she receives in the exchange has a fair market value of $500. Maria's tax basis in the stock will be $400.
True 
 Control as it relates to a section 351 transaction is strictly defined to be 80 percent or more of the voting power of the stock of the corporation to which property is transferred.
 False 
 The definition of property as it relates to a §351 transaction includes money. True 
 To meet the control test under section 351, a taxpayer transferring property to a corporation must by himself own 80 percent or more of the corporation's voting stock and 80 percent of each class of nonvoting stock after the transfer even if there are other transferors of property.
 False 
 Gain and loss realized in section 351 transactions will be recognized if the taxpayer receives boot in the exchange. 
 False 
 A taxpayer must receive voting common stock to be eligible for deferral in a section 351 exchanges. False 
 A taxpayer always will have a tax basis in boot received in a section 351 transactions equal to its fair market value. 
True 
 M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transactions. The assumed liability will, as a general rule, be treated as boot received by Jane.
 False 
 Han transferred land he held as an investment to his corporation in a section 351 transactions. Han had held the land for two years prior to the transfer. Han's holding period in the stock he received in the exchange includes the period for which he held the land before transferring it to the corporation.
True 
 In general, a corporation can choose to use either the accrual or cash method of accounting no matter how large the corporation.
 False 
 Corporations calculate adjusted gross income (AGI) in the same way as individuals. False 
 Corporations have a larger standard deduction than individual taxpayers because they generally have higher revenues. 
 False 
 Large corporations are allowed to use the cash method of accounting for at least the first two years of their existence. 
 False 
 Although a corporation may report a temporary book-tax difference for an item of income or deduction for a given year, over the long term the total amount of income or deduction it reports with respect to that item will be the same for both book and tax purposes.
True 
 An unfavorable temporary book-tax difference is so named because it causes taxable income to decrease relative to book income.
 False 
 Income that is included in book income, but excluded from taxable income, results in a favorable, permanent book-tax difference.
True 
 Federal income tax expense reported on a corporation's books generates a temporary book-tax difference. False 
 For a corporation, purchased goodwill generally leads to temporary book-tax differences. True 
 In a given year, Adams Corporation has goodwill impairment in excess of the allowable amortization for tax purposes. It has a favorable temporary book-tax difference for that year.
 False 
 For incentive stock options, the value of the options that is expensed as compensation in a given year always creates a permanent, unfavorable book-tax difference.
True 
 For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised. 
True 
 A nonqualified stock option will create a permanent book-tax difference in the year it is exercised if the bargain element is different from the estimated value of the option for financial accounting purposes when it was issued.
True 
 In contrast to an individual, a corporation may deduct the entire amount of a net capital loss. False 
 A corporation may carry a net capital loss forward five years to offset capital gains in future years but it may not carry a net capital loss back to offset capital gains in previous years.
 False 
 A corporation may carry a net capital loss back two years and...
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