98. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest24 In the current year Zircon Corporation donated scientific property worth $300 000 to City University (a qualified charitable organization) to be used in research. The basis of the property was $140 000 and Zircon had held it for ten months as inventory. Zircon Corporation may deduct $220 000 as a charitable contribution (ignoring the taxable income limitation). a. True b. False 99. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest25 Heron Corporation a calendar year C corporation had an excess charitable contribution for 2010 of $5 000. In 2011 Heron made a further charitable contribution of $20 000. Heron’s 2011 deduction is limited to $15 000 (10% of taxable income). The current year’s contribution must be applied first against the $15 000 limitation. a. True b. False 100. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest26 For a corporation in 2011 the domestic production activities deduction is equal to 9% of the higher of (1) qualified production activities income or (2) taxable income. However the deduction cannot exceed 50% of the W-2 wages related to qualified production activities income. a. True b. False 101. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest27 Generally corporate net operating loss can be carried back 3 years and forward 5 years to offset taxable income for those years. a. True b. False 102. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest28 Azul Corporation a calendar year C corporation received a dividend of $50 000 from Naranja Corporation. Azul owns 10% of the Naranja Corporation stock. Assuming it is not subject to the taxable income limitation Azul’s dividends received deduction is $35 000. a. True b. False 103. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest29 The dividends received deduction may be subject to a limitation based on a percentage of taxable income computed without regard to the NOL deduction the domestic production activities deduction the dividends received deduction and any capital loss carryback to the current tax year. a. True b. False 104. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest30 No dividends received deduction is allowed unless the corporation has held the stock for more than 45 days. a. True b. False 105. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest31 Black Corporation an accrual basis taxpayer was formed and began operations on February 1 2011. During its first year of operations (February 1 – December 31 2011) Black incurred the following expenses: fee paid to state of incorporation of $2 000 accounting and legal services incident to organization of $9 000 and expenses related to the printing and sale of stock certificates of $10 000. Black has $11 000 of qualified organizational expenditures that it may elect to amortize. a. True b. False 106. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest32 A corporation may elect to amortize startup expenditures over the 60-month period beginning with the month in which the corporation begins business. a. True b. False 107. CHAPTER 2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest33 A personal service corporation with taxable income of $100 000 will have a tax liability of $22 250. a. True b. False
