Question 1

Which of the following cannot be taxed as a partnership?

Accepted Answer

A) An accounting PLLC 
B) An LLC with only one member 
C) An LLC owning only rental property 
D) A partnership with no limited partners 
A) An accounting PLLC 
B) An LLC with only one member 
C) An LLC owning only rental property 
D) A partnership with no limited partners

Question 2

Which of the following statements does not apply to a qualifying S corporation?

Accepted Answer

A) It may have 55 shareholders 
B) It may have a resident alien shareholder 
C) It may only have one class of stock outstanding 
D) It is subject to the corporate income tax 
A) It may have 55 shareholders 
B) It may have a resident alien shareholder 
C) It may only have one class of stock outstanding 
D) It is subject to the corporate income tax

Question 3

What is Alexander's net gain or loss on the liquidation of his 100 percent interest in an S corporation if the corporation distributes the following three assets to him in exchange for his stock:   Prior to any distributions,Alexander's basis in his S corporation interest was $160,000.

Accepted Answer

A) ($12,000) 
B) ($22,000) 
C) $10,000 
D) $22,000 
A) ($12,000) 
B) ($22,000) 
C) $10,000 
D) $22,000

Question 4

How are income and loss apportioned to S corporation shareholders for taxation?

Accepted Answer

Income and losses are first ap

Question 5

Clarence receives a liquidating distribution of receivables (fair market value and basis both equal $20,000)and land (fair market value = $25,000 and basis = $18,000)for his partnership interest with a $70,000 basis in a liquidating distribution.What is Clarence's realized and recognized gain or loss on this distribution and his basis in the property received?

Accepted Answer

Realized: $20,000 + $25,000 -

Question 6

Mary purchased 40 percent of an S corporation on February 28 of the current year and sells a 20 percent interest on November 30.If the corporation reports $10,000 of income for the year,what income does it report on Mary's Schedule K-1.

Accepted Answer

A) $7,534 
B) $3,014 
C) $4,000 
D) $3,184 
A) $7,534 
B) $3,014 
C) $4,000 
D) $3,184

Question 7

Stewart is a 30 percent general partner in STP Partnership.His basis in his partnership interest at the beginning of the year was $40,000.During the year,the partnership reported a $30,000 loss and paid off a $120,000 recourse debt.What is Stewart's year-end basis in his partnership interest?

Accepted Answer

A) 0 
B) $4,000 
C) $31,000 
D) $67,000 
A) 0 
B) $4,000 
C) $31,000 
D) $67,000

Question 8

Manuel purchased a 30% interest in MAC general partnership for $40,000 cash and materially participated in the partnership for the entire year.The partnership had $50,000 in liabilities when Manuel purchased his interest and the liabilities increased $10,000 during the year.If the partnership incurred a $300,000 loss this year,how much of this loss can Manuel deduct?

Accepted Answer

A) 0 
B) $40,000 
C) $58,000 
D) $65,000 
A) 0 
B) $40,000 
C) $58,000 
D) $65,000

Question 9

Which of the following may not be partners in a partnership?

Accepted Answer

A) Corporation 
B) S corporation 
C) LLC 
D) All may be partners. 
A) Corporation 
B) S corporation 
C) LLC 
D) All may be partners.

Question 10

A limited partnership must have a general partner.

Accepted Answer

A) True 
 B)False

Question 11

Calvin sells his 40 percent interest in a partnership with a $70,000 basis for $75,000.The partnership has two assets,inventory valued at $100,000 with a $50,000 basis and investments valued at $87,500 that have a basis of $125,000.How will Calvin report the sale of the partnership interest?

Accepted Answer

A) $5,000 capital loss 
B) $20,000 ordinary income 
C) $20,000 ordinary income; $15,000 capital loss 
D) $5,000 capital gain 
A) $5,000 capital loss 
B) $20,000 ordinary income 
C) $20,000 ordinary income; $15,000 capital loss 
D) $5,000 capital gain

Question 12

All partnerships are passive activities.

Accepted Answer

A) True 
 B)False

Question 13

What kind of an entity is a limited liability company for the purpose of taxing its income?

Accepted Answer

A limited liability company may elect to

Question 14

How does a partner establish that his current activity meets the material participation requirements?

Accepted Answer

There are four ways to be deemed to mate

Question 15

How may an S election terminate?

Accepted Answer

An S election may terminate by a vote of

Question 16

What is a sole proprietorship and how is this business entity taxed?

Accepted Answer

A sole proprietorship is a business that

Question 17

Why are partnerships and S corporations called flow-through entities?

Accepted Answer

Partnerships and S corporations are call

Question 18

Which of the following is not a potential S corporation tax?

Accepted Answer

A) The personal holding company tax 
B) The built-in gains tax 
C) The LIFO recapture tax 
D) The excess net passive investment income tax 
A) The personal holding company tax 
B) The built-in gains tax 
C) The LIFO recapture tax 
D) The excess net passive investment income tax

Question 19

Simpco Partnership has gross operating revenue of $450,000,cost of sales of $150,000,salaries to employees of $40,000,a $25,000 Section 179 expense deduction,$10,000 of other depreciation,interest income of $2,000,a $4,000 capital loss,and a $500 charitable contribution deduction.Simpson is a 20 percent partner in Simpco Partnership.He has a $60,000 basis in his partnership interest at the end of the year after all income/loss items have been passed through to him.What was his beginning-of-the-year basis in his partnership interest?

Accepted Answer

$60,000 - .2 ($250,000 - $25,0

Question 20

A sole proprietor:

Accepted Answer

A) deducts his or her retirement plan contributions from business income. 
B) may not pay a salary to a related party who works in the business. 
C) deducts employee fringe benefit costs from business income. 
D) files a separate tax return for business income. 
A) deducts his or her retirement plan contributions from business income. 
B) may not pay a salary to a related party who works in the business. 
C) deducts employee fringe benefit costs from business income. 
D) files a separate tax return for business income.

Which of the following cannot be taxed as a partnership?

Which of the following statements does not apply to a qualifying S corporation?

What is Alexander's net gain or loss on the liquidation of his 100 percent interest in an S corporation if the corporation distributes the following three assets to him in exchange for his stock: Prior to any distributions,Alexander's basis in his S corporation interest was $160,000.

How are income and loss apportioned to S corporation shareholders for taxation?

Mary purchased 40 percent of an S corporation on February 28 of the current year and sells a 20 percent interest on November 30.If the corporation reports $10,000 of income for the year,what income does it report on Mary's Schedule K-1.

Stewart is a 30 percent general partner in STP Partnership.His basis in his partnership interest at the beginning of the year was $40,000.During the year,the partnership reported a $30,000 loss and paid off a $120,000 recourse debt.What is Stewart's year-end basis in his partnership interest?

Which of the following may not be partners in a partnership?

A limited partnership must have a general partner.

Calvin sells his 40 percent interest in a partnership with a $70,000 basis for $75,000.The partnership has two assets,inventory valued at $100,000 with a $50,000 basis and investments valued at $87,500 that have a basis of $125,000.How will Calvin report the sale of the partnership interest?

All partnerships are passive activities.

What kind of an entity is a limited liability company for the purpose of taxing its income?

How does a partner establish that his current activity meets the material participation requirements?

How may an S election terminate?

What is a sole proprietorship and how is this business entity taxed?

Why are partnerships and S corporations called flow-through entities?

Which of the following is not a potential S corporation tax?

A sole proprietor:

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Income Taxation of Individuals

Wealth Transfer Taxes

Filters

Exam 10: Sole Proprietorships and Flow-Through Entities

Which of the following cannot be taxed as a partnership?

Which of the following statements does not apply to a qualifying S corporation?

What is Alexander's net gain or loss on the liquidation of his 100 percent interest in an S corporation if the corporation distributes the following three assets to him in exchange for his stock: Prior to any distributions,Alexander's basis in his S corporation interest was $160,000.

How are income and loss apportioned to S corporation shareholders for taxation?

Mary purchased 40 percent of an S corporation on February 28 of the current year and sells a 20 percent interest on November 30.If the corporation reports $10,000 of income for the year,what income does it report on Mary's Schedule K-1.

Stewart is a 30 percent general partner in STP Partnership.His basis in his partnership interest at the beginning of the year was $40,000.During the year,the partnership reported a $30,000 loss and paid off a $120,000 recourse debt.What is Stewart's year-end basis in his partnership interest?

Which of the following may not be partners in a partnership?

A limited partnership must have a general partner.

Calvin sells his 40 percent interest in a partnership with a $70,000 basis for $75,000.The partnership has two assets,inventory valued at $100,000 with a $50,000 basis and investments valued at $87,500 that have a basis of $125,000.How will Calvin report the sale of the partnership interest?

All partnerships are passive activities.

What kind of an entity is a limited liability company for the purpose of taxing its income?

How does a partner establish that his current activity meets the material participation requirements?

How may an S election terminate?

What is a sole proprietorship and how is this business entity taxed?

Why are partnerships and S corporations called flow-through entities?

Which of the following is not a potential S corporation tax?

A sole proprietor:

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Income Taxation of Individuals

Wealth Transfer Taxes

Filters