Multiple choice
1. For 2011, the Butternut Corporation has net income on its books of $75,000, including the following items: Net capital losses $10,000 Federal income tax expense 22,250 Federal tax depreciation exceeds the depreciation deducted on the books by $7,250. What is the corporation’s taxable income?
A) $97,250
B) $75,000
C) $85,000
D) $107,250
E) $100,000
2. Ted forms the Nutshell Corporation during the 2011 tax year. To form the corporation, Ted transfers assets having a fair market value of $550,000 to Nutshell Corporation for 100 percent of the corporation’s stock. Ted’s adjusted basis in the assets transferred was $250,000 and Nutshell Corporation assumed a $175,000 mortgage on the assets. If the fair market value of the stock received by Ted is $375,000, what is his basis in the stock received from the corporation?
A) $75,000
B) $425,000
C) $550,000
D) $375,000
3.The partnership of Nixon and Whittier realized the following items of income during the year ended December 31, 2011: Net income from operations $93,000 Dividends from domestic corporations 5,000 Interest on corporate bonds 2,000 Net long-term capital gains 15,000 Net short-term capital gains 11,000 Both of the partners are on a calendar year basis. What is the total income which should be reported as ordinary income from business activities of the partnership for 2011?
A) $126,000
B) $74,000
C) $60,000
D) $93,000
E) $100,000
F) $250,000
4. On September 30, 2011, Amber was admitted to partnership in the firm of Waves and Grain. Her contribution to capital consisted of 1,000 shares of stock in Biotech Corporation, which she bought in 2002 for $15,000 and which had a fair market value of $45,000 on September 30, 2011. Amber’s interest in the partnership’s capital and profits is 40 percent. On September 30, 2011, the fair market value of the partnership’s net assets (after Amber was admitted) was $112,500, and profit for the 3 months ended December 31, 2011 was $6,000. What is Amber’s taxable gain in 2011 on the exchange of stock for her partnership interest?
A) $12,000
B) $30,000 long-term capital gain
C) $30,000 ordinary income
D) $2,400
E) $0 gain or loss
