'Corporations Concluded\r'

'1. (TCO E) For federal task purposes, royal line income that is non derived in the ordinary course of a agate line concern is classified as: (Points : 5) portfolio income. serve well sprightly income. static income. N hotshot of the above 2. (TCO F) When comparing unified and individual taxationation, the following statement is true: (Points : 5) foreign individual taxpayer, corporate may not take for a long-term capital loss carryforward. twain types of taxpayers have percentage limitations on the charitable plowshare synthetic thinking, coupled with a carryover of the excess contribution. All taxpayers may carry net operating losings backwards two grades, forward 20 years.All of the above. answer 3. (TCO H) Al and Amy file a joint return for the 2012 tax year. Their adjusted gross income is $80,000. They had net investment income of $7,000. In 2012, they had the following interest expenses: Personal credit card interest: $4,000 Home mortgage interest: $8,000 in vesting interest (on loans used to buy stocks): $10,000 What is the interest deduction for Al and Amy for the 2012 tax year? (Points : 5) $8,000 $15,000. answer $12,000 $18,000 4. (TCO B) A contribution made to the following donee is not deductible. (Points : 5) Boy Scouts of America Oxford University, England. answerSociety for the Prevention of Cruelty to Animals geographical mile solid ground University California State Fair (an action at law of the State of California) 5. (TCO A) The following taxes were paid by Tim: square estate taxes on his home: $2,000 State income taxes: $900 State gasoline tax (personal use of automobile): $150 In itemizing his deductions, what is the sum total that Tim may claim as a deduction for taxes? (Points : 5) $2,000 $2,900. answer $3,050 $0 6. (TCO F) Hoover, Inc. had gross pass on from operations of $230,000, operating and other expenses of $310,000, and dividends received from a 45 percent-owned domestic community of $120,000.Hoovers tax do for the year is: (Points : 5) $8,000 ratable income. $56,000 net operating loss. answer $40,000 taxable income. $80,000 net operating loss. 7. (TCO G) All of the large stock of a closely held C corporation is owned equ exclusivelyy by David Smith and Steve Bufusno. In 2012, the corporation generates taxable income of $30,000 from its active business activities. In addition, it earns $20,000 of interest from investments and incurs a $40,000 loss from a hands-off bodily function. How oft income does the C corporation report for 2012?(Points : 5) $10,000 of portfolio income $0 $20,000 of portfolio income. answer None of the above 8. (TCO G) Bob, who is single, has $90,000 of salary, $25,000 of income from a limited partnership, and a $30,000 resistless loss from a concrete estate rental exertion in which he actively participates. His modified adjusted gross income is $90,000. Of the $30,000 loss, how much is deductible? (Points : 5) $30,000. answer $10,000 $25,000 $0 9. (T CO F) Jen owns a fix proprietorship, and Steve is the repair shareholder of a C (regular) corporation.Each business sustained a $14,000 operating loss and a $3,000 capital loss for the year. Evaluate how these losses exit affect the taxable income of the two owners? (Points : 17) A touch on proprietorship is taxed through the business owners personal tax return. Therefore Jen would enter the $14,000 operating loss from the proprietorship on Schedule C of Form 1040 or one of its variants. This report loss would offset every income Jen reported from any other source on her personal income tax filed. As a noncorporate taxpayer Jen bunghole also deduct the $3000 capital loss for the year.As the sole shareholder of a C corp Steve forget see no effect on his taxable income as the shareholder. Income from a C corporation is reported when the shareholder receive dividends. C corporation losses are not reported by the shareholders. 10. (TCO G) concisely (1) define and (2) discuss t he purpose and impact of separately of the following: a. at-risk rules b. suspend passive activity losses c. strong appointment (Points : 18) a. at-risk rules comment: Losses from a business operation are limited to the amount of money you can in truth lose in the business.You are defer to at-risk rules if you are filing Schedules C, E, or F. Tax laws limiting the amount of losses an investor (usually a limited partner) can claim. Only the amount actually at risk can be deducted. b. suspended passive activity losses Definition: A capital loss that cannot be realized in a given tax year cod to passive activity limitations. These losses are consequently â€Å"suspended” until they can be netted against passive income in a future tax year. hang up losses are incurred as a impression of passive activities, and can only be carried forward.Suspended losses that are incurred as a result of the impulse of a passive interest are subject to an annual capital loss limit. Suspe nded losses can, however, be used to offset income realized in a later year that is generated from stuff date in the activity that initially produced the loss. For example, if a taxpayer incurs a $5,000 suspended loss in one year from a passive activity and thusly visiblely participates in the activity the following year and earns $10,000, then the suspended loss may be utilize against $5,000 of the earned income, leaving the taxpayer with $5,000 of declarable income for the year.c. material participation. Definition: A set of criteria that governs whether a taxpayer is a material participant in a business venture. The material participation test will determine whether business income received by the taxpayer is active or passive. bodily participation is determined each year. The IRS has seven tests to determine material participation: The taxpayer flora 500 hours or more during the year in the activity. The taxpayer does substantially all the work in the activity.The taxpay er industrial plant more than coke hours in the activity during the year and no one else works more than the taxpayer. The activity is a monumental participation activity (SPA), and the sum of SPAs in which the taxpayer works 100-500 hours exceeds 500 hours for the year. The taxpayer materially participated in the activity in any 5 of the prior 10 years. The activity is a personal service activity and the taxpayer materially participated in that activity in any 3 prior years.Based on all of the facts and circumstances, the taxpayer participates in the activity on a regular, continuous, and substantial basis during such year. However, this test only applies if the taxpayer works at least 100 hours in the activity, no one else works more hours than the taxpayer in the activity, and no one else receives requital for managing the activity. Determination of â€Å"material participation” is complicated, and lack of material participation can result in passive loss rules. If yo u think lack of material participation may be an issue in your business, tone down with your tax adviser.\r\n'