1 In the current year Norris Corporation has a 50000 of ordi

1. In the current year, Norris Corporation, has a $50,000 of ordinary business income, and a Net Long Term Capital Loss (NLTCL) of $4,800. Norris had no previous capital gains or losses. How much of the capital loss may Norris Corporation deduct in the current year?

a. $0

b. $3,000

c. $4,800

d. None of the above [Answer: _______]

2. Blue Devil LLC purchased a rental house and land during the current year for $150,000. The purchase price was allocated as follows: $100,000 to the building and $50,000 to the land. The property was placed in service on May 22. Calculate Blue Devil’s maximum depreciation for this first year:

a. $1,605

b. $2,273

c. $2,408

d. $3,410

e. None of these [Answer: _______]

3. The most significant impact that the new Tax Cuts and Job Act of 2017 will have on corporations in the future is most likely:

a. A reduction in the number of corporations that may be created due to increased tax complexity

b. An increase in the income tax liability of most corporations

c. A decrease in the income tax liability of most corporations

d. An increased likelihood of corporate bankruptcies.

e. None of these. [Answer: _______]

4. Sarah invested $50,000 in the ABC Limited Partnership in 2018 and received a 10 percent interest in the partnership. She is a limited partner and has no management responsibilities. During 2018, ABC LP generated a $90,000 profit and she withdrew $5,000 from the partnership. What is Sarah’s tax basis in ABC LP at the end of 2018?

a. $45,000

b. $50,000

c. $54,000

d. $59,000

e. None of these. [Answer: _______]

Solution

1 Ans is B $3,000 Explanation: Net capital loss is allowed to set off ordinary income upto $3000 2 Ans is a $1605 Explanation Building cost $100,000 x First year depreciation rate 1.605% Plcaed in service in 5th month, non residential property 39 yrs life Depreciation first year $ 1,605.00 3 Ans is E None of these Explanation: This act specifies flat rate of 21%, i.e. some of corporations will face increased tax and some of them decresaed tax So no option is correct, Bankruptcy and new formation can not be defined. 4 Ans is C $54000 Explanation: Beginning basis $50,000 Add: Profit share at 10% 9000 Less: withdrawal -5000 Ending basis $54,000