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1. What conditions muse be met for an accrual-basis
corporation to deduce a charitab le contribution in a year before it is made?
2. Acorn Corporation is publicly traded on the American
Stock Exchange. Its chief executive officer, Carl, currently receives an annual
salary of $1 million. The board of directors is considering increasing his
compensation by $200,000.
a. What are the income tax consequences co Acorn if Carl’s
salary is increased co $1,200,000?
b. What alternatives might be considered to increase Carl’s
annual compensation chat would produce more favorable tax consequences for
Acorn?

1.Current tax law imposes a $1 million limitation on the
deductibility of executive compensation . Should such limitation be reta ined
or repealed? Give reasons for your opinion .
2. Collins Corporation pa id a $30,000 alternative minimum
tax in 2017. What AMT benefit (if any) is availab le co reduce federal income
taxes paid in the current tax year or in a future tax year?
3. The accumu lated earnings tax is effectively a penalty on
corporations .
a. What is the purpose of the accumulated earn – ings tax?
b. Why does the “reasonab le needs of the
business” exception either reduce or eliminate the accumulated earnings
tax burden for many corporations?

1.In terms of a corporation’s incurring liability for the
tax, what is the difference between the persona l hold ing company tax and the
accumu lated earnings tax? Do bot h taxes require a tax avoid – ance motive?
2. Why are controlled groups of corporations required co
apportion among group members tax attr ibutes such as the Sec. 179 expense
limitation and accumu lated earn ings credit?
3. Discuss the underlying rationale for the nonrec –
ognition of gain or loss in a Sec. 351 transaction.

Acme Corporation is a highly profitable closely held
corporation that has never paid a dividend. During the past five years,
after-tax earn ings of $200,000 per year have been reta ined in the business.
All of the earnings ($1 million) have been reinvested in operating assets and
to finance an expansion of the business. ls the corporation sub – ject to the
accumulated earnings tax because no dividends have been paid?

a. Brett Nelson transfers a building having a $75,000 FMV
and a $30,000 adjusted basis to Gator Corporation . An advantage of the asset
transfer under Sec. 351 is that Brett can defer his $45,000 ($75,000 FMV –
$30,000 adjusted basis) realized gain. What disadvantages accrue co Gator as a
result of the pose-transfer aspects of the transaction?
b. Assume the same facts as in Pare a except char the
building’s FMV is instead $30,000 and its adjusted basis is $75,000. What tax
disadvantage results from the transfer as presently structured? Are there any
suggest ions char you can offer co Brett to improve his tax benefits?
c. Explain why the basis of gain property chat is
contributed to a corporation in a Sec. 351 exchange is not equal co its FMV on
the date of the exchange. ls the basis of the property chat is contributed co
the corporat ion adjusted when gain is recognized by the transferor?
d. How would your answers to Part a change if Brett Nelson
transferred a $25,000 mortgage along with the land and received stock having a
value less than the amount of the liability?