9 true/ false questions

True / false

1. Marge has an outside basis of $100,000 in a partnership, at a time when the partnership makes a $120,000 nonliquidating cash distribution to her. Marge has a $20,000 capital gain from the distribution.

2. The IRS will usually challenge tax planning that shifts income between related parties.

3. Section 267 is the Internal Revenue Code section that specifically disallows a tax deduction for losses on the sale or exchange of property between related parties, as well as prohibiting a deduction for unpaid expenses until the related party payee recognizes income

4. Deferral of tax liability can be obtained by deferring tax deductions into later tax years.

5. For a tax-free formation of a corporation, control is defined as the ownership of more than 75 percent or more of the total voting power represented by all classes of voting stock.

6. Partners must have control (defined as 80% ownership) immediately after a contribution of property to a partnership in order to avoid gain or loss recognition on the transfer.
  
7. Nonqualified plans provide an immediate deduction for the employer and deferred income to the employees.


8. For Year 2003, the maximum expense allowed under Section 179 of the Internal Revenue Code, for those companies not doing business in any empowerment zone or enterprise community, is $25,000.

9. The foreign tax credit can be used to partially reduce the tentative minimum tax.