Comprehensive Corporate #2

Perry, Terry, and Penny agreed to form a new corporation called PTP Inc. They all agreed that each would contribute the equivalent of $60,000 for 1/3 of the ownership in the new corporation. Each contributed the following:

In the first year of operations PTP Inc. experienced the following transactions:

1. Received $25,000 of tax-exempt interest on HeartCity municipal bonds.
2. Had operating revenues of $275,000.
3. Incurred operating expenses of $150,000
4. Received dividends of $20,000 from a company in which they had a 10 percent ownership interest in.
5. Made charitable contributions of $35,000

1		Penny’s deferred gain from her contribution to the corporations.
			A)	$85,000
			B)	$0
			C)	$60,000
			D)	$25,000
			E)	Some other answer
2		The corporation’s basis in Asset A.
			A)	$0
			B)	$60,000
			C)	$70,000
			D)	$40,000
			E)	Some other answer.
3		Terry’s basis in his shares of stock from the corporation.
			A)	$0
			B)	$50,000
			C)	$60,000
			D)	$20,000
			E)	Some other answer
4		The corporation’s charitable contribution deduction for the year.
			A)	$35,000
			B)	$14,500
			C)	$8,500
			D)	$7,650
			E)	Some other answer.
5		The corporation’s dividend received deduction for the year?
			A)	$0
			B)	$7,000
			C)	$10,000
			D)	$14,000
			E)	Some other answer.
6		What is PTP’s taxable income?
			A)	$0
			B)	$116,500
			C)	$130,500
			D)	$145,000
			E)	Some other answer.
7		What is Penny’s recognized gain on her contribution to the corporation?
			A)	$25.000
			B)	$10,000
			C)	$5,000
			D)	$0
			E)	Some other answer
8		What is Perry's deferred gain?
			A)	$20,000
			B)	$10,000
			C)	$30,000
			D)	$50,000
			E)	Some other answer.
9		Assume that Perry only contributed an asset with a FMV of $70,000 and an adjusted basis of $35.000. If Perry received $10,000 in cash for his contribution, what would Perry's deferred gain be?
			A)	$0
			B)	$10,000
			C)	$35,000
			D)	$25,000
			E)	Some other answer.
10		Assuming no dividend distributions by PTP, what should the retained earnings account be at the end of the first year?
			A)	$112,815
			B)	$87,815
			C)	$116,500
			D)	$94,250
			E)	Some other answer.