1. Norma formed Hyacinth Enterprises, a proprietorship, in 2014. In its first year, Hyacinth had ope
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1. Norma formed HyacinthEnterprises, a proprietorship, in 2014. In its first year, Hyacinth hadoperating income of $400,000 and operating expenses of $240,000. In addition,Hyacinth had a long-term capital loss of $10,000. Norma, the proprietor ofHyacinth Enterprises, withdrew $75,000 from Hyacinth during the year. AssumingNorma has no other capital gains or losses, how does this information affecther taxable income for 2014?a.Increases Norma’s taxable income by $157,000 ($160,000ordinary business income – $3,000 longÂterm capital loss).b.Increases Norma’s taxable income by $150,000 ($160,000ordinary business income – $10,000 longÂterm capital loss).c.Increases Norma’s taxable income by $75,000.d.Increases Norma’s taxable income by $160,000.e.None of the above.2.Pablo, a sole proprietor, sold stock held as an investmentfor a $40,000 long-term capital gain. Pablo’s marginal tax rate is 33%. LoonCorporation, a C corporation, sold stock held as an investment for a $40,000long-term capital gain. Loon’s marginal tax rate is 35%. What tax rates areapplicable to these capital gains?a.15% rate applies to Pablo and 35% rate applies to Loon.b.15% rate applies to Loon and 33% rate applies to Pablo.c.35% rate applies to Loon and 33% rate applies to Pablo.d.15% rate applies to both Pablo and Loon.e.None of the above.3.Lucinda is a 60% shareholder in Rhea Corporation, a calendaryear S corporation. During the year, Rhea Corporation had gross income of$550,000 and operating expenses of $380,000. In addition, the corporation soldland that had been held for investment purposes for a short-term capital gainof $30,000. During the year, Rhea Corporation distributed $50,000 to Lucinda.With respect to this information, which of the following statements is correct?a.Rhea Corporation will pay tax on taxable income of $200,000.b.Lucinda reports ordinary income of $50,000.c.Lucinda reports ordinary income of $120,000.d.Lucinda reports ordinary income of $102,000 and a short-termcapital gain of $18,000.e.None of the above.4. Elk, a C corporation,has $370,000 operating income and $290,000 operating expenses during the year.In addition, Elk has a $10,000 longÂterm capital gain and a $17,000 shortÂtermcapital loss. Elk’s taxable income is:a. $63,000.b. $73,000.c. $80,000.d. $90,000.e. None of the above.5.Flycatcher Corporation, a C corporation, has two equal individualshareholders, Nancy and Pasqual. In the current year, Flycatcher earned$100,000 net profit and paid a dividend of $10,000 to each shareholder.Regardless of any tax consequences resulting from their interests inFlycatcher, Nancy is in the 33% marginal tax bracket and Pasqual is in the 15%marginal tax bracket. With respect to the current year, which of the followingstatements is incorrect?a.Flycatcher cannot avoid the corporate tax altogether bydistributing all $100,000 of net profit as dividends to the shareholders.b.Nancy incurs income tax of $1,500 on her dividend income.c.Pasqual incurs income tax of $1,500 on his dividend income.d.Flycatcher pays corporate tax of $22,250.e.None of the above.6. Which of thefollowing statements is incorrectaboutLLCs and the check-the-box Regulations?a.If a limited liability company with more than one owner doesnot make an election, the entity is taxed as a corporation.b.All 50 states have passed laws that allow LLCs.c.An entity with more than one owner and formed as acorporation cannot elect to be taxed as a partnership.d.If a limited liability company with one owner does not makean election, the entity is taxed as a sole proprietorship.e.A limited liability company with one owner can elect to betaxed as a corporation.7.Copper Corporation, a C corporation, had gross receipts of$5 million in 2011, $6 million in 2012, and $3 million in 2013. GoldCorporation, a personal service corporation (PSC), had gross receipts of $4million in 2011, $7 million in 2012, and $5 million in 2013. Which of thecorporations will be allowed to use the cash method of accounting in 2014?a.Copper Corporation only.b.Gold Corporation only.c.Both Copper Corporation and Gold Corporation.d.Neither Copper Corporation nor Gold Corporation.e.None of the above.8.Ivory Corporation, a calendar year, accrual method Ccorporation, has two cash method, calendar year shareholders who are unrelatedto each other. Craig owns 35% of the stock, and Oscar owns the remaining 65%.During 2014, Ivory paid a salary of $100,000 to each shareholder. On December31, 2014, Ivory accrued a bonus of $25,000 to each shareholder. Assuming thatthe bonuses are paid to the shareholders on February 3, 2015, compute IvoryCorporation’s 2014 deduction for the above amounts.a. $250,000.b. $225,000.c. $200,000.d. $125,000.e.None of above.9.On December 31, 2014, Peregrine Corporation, an accrualmethod, calendar year taxpayer, accrued a performance bonus of $100,000 toCharles, a cash basis, calendar year taxpayer. Charles is president and soleshareholder of the corporation. When can Peregrine deduct the bonus?a.In 2014, if the bonus was authorized by the Board ofDirectors and payment was made on or before March 15, 2015.b.In 2015, if payment was made at any time during that year.c.In 2014, if payment was made on or before March 15, 2015.d.In 2015, but only if payment was made on or before March 15,2015.e.None of the above.10.Carrot Corporation, aC corporation, has a net short-term capital gain of $65,000 and a net long-termcapital loss of $250,000 during 2014. Carrot Corporation had taxable incomefrom other sources of $720,000. Prior years’ transactions included thefollowing:2010Net long-term capital gain$150,0002011Net short-term capital gain60,0002012Net short-term capital gain45,0002013Net long-term capital gain35,000Compute the amount of Carrot’scapital loss carryover to 2015.a. $0.b. $32,000.c. $45,000.d. $185,000.e. None of the above.11.In 2014, BluebirdCorporation had net income from operations of $100,000. Further, Bluebirdrecognized a long- term capital gain of $30,000, and a short-term capital lossof $45,000. Which of the following statements is correct?a.Bluebird Corporation will have taxable income in 2014 of$100,000 and will have a net capital loss of $15,000 that can be carried back 3years and forward 5 years.b.Bluebird Corporation may use the capital loss to offset thecapital gain and must carry the net capital loss of $15,000 forward five yearsas a short-term capital loss.c.Bluebird Corporation may deduct $33,000 of the capital lossin 2014 and may carry forward the remainder of the capital loss indefinitely tooffset capital gains.d.Bluebird Corporation will have taxable income in 2014 of$85,000.e.None of the above.12.In the current year,Sunset Corporation (a C corporation) had operating income of $200,000 andoperating expenses of $175,000. In addition, Sunset had a $30,000 long-termcapital gain, a $52,000 short-term capital loss, and $5,000 tax-exempt interestincome. What is Sunset Corporation’s taxable income for the year?a. $0.b. $3,000.c. $22,000.d. $30,000.e. None of the above. “Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!” “Is this question part of your assignment? We Can Help!”
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