Miro Corporation Exchanged 10% of Its Stock with Lobo Shareholders

question 27

Multiple Choice

Miro Corporation exchanged 10% of its stock with Lobo shareholders for all of the Lobo stock outstanding. At the time of the acquisition by Miro, the fair market value of Lobo was $1.5 million, and the Federal long-term tax-exempt rate was 5%. In the current year, Miro has $600,000 of taxable income. Lobo has excess credits from prior years amounting to $40,000. What is Miro's Federal income tax for the year, if it is in the 34% tax bracket?

• A) $204,000.
• B) $178,000.
• C) $96,000.
• D) $55,000.
• E) $27,540.

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Definitions:

Balance Sheet

A summary report detailing a firm's assets, liabilities, and equity of shareholders at a certain time.

Sales Manager

An individual who directs an organization's sales team, oversees its operations, and strives to achieve sales targets through planning and implementing sales strategies.

Salary

A fixed regular payment, typically paid on a monthly or biweekly basis, made by an employer to an employee, especially a professional or white-collar worker.

Warranty Liability

An obligation recognized by a company to repair, replace, or compensate for defective goods sold to customers.