Question 1

Which of the following is not a characteristic of sole proprietorships?

Accepted Answer

A) Owners pay self-employment taxes 
B) Formation is always tax-free 
C) Distributions of entity income are tax-free 
D) Loss is recognized on liquidation 
A) Owners pay self-employment taxes 
B) Formation is always tax-free 
C) Distributions of entity income are tax-free 
D) Loss is recognized on liquidation

Question 2

Only 50 percent or more of the shareholders of an S corporation must consent to the S election.

Accepted Answer

A) True 
 B)False

Question 3

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.What are the partnership's bottom line net income and its separately stated items?

Accepted Answer

$450,000 - $150,000 - $40,000 - $10,000

Question 4

To qualify for the real property business exception for rental activities

Accepted Answer

A) the taxpayer must materially participate for at least 500 hours. 
B) the taxpayer must materially participate for at least 750 hours. 
C) the taxpayer and spouse must materially participate for at least 1000 hours. 
D) half the taxpayer's time must be spent in the activity and must equal at least 500 hours in the activity. 
A) the taxpayer must materially participate for at least 500 hours. 
B) the taxpayer must materially participate for at least 750 hours. 
C) the taxpayer and spouse must materially participate for at least 1000 hours. 
D) half the taxpayer's time must be spent in the activity and must equal at least 500 hours in the activity.

Question 5

To qualify for the limited deduction for rental real estate losses

Accepted Answer

A) the taxpayer's adjusted gross income must be less than $150,000. 
B) the taxpayer must materially participate in the activity 
C) the taxpayer must actively participate in the activity 
D) Both (a)and (c). 
A) the taxpayer's adjusted gross income must be less than $150,000. 
B) the taxpayer must materially participate in the activity 
C) the taxpayer must actively participate in the activity 
D) Both (a)and (c).

Question 6

The Clio Corporation,an S corporation,makes a nonliquidating distribution of $10,000 cash and property (fair market value = $10,000; basis = $7,000)to James,a 50 percent shareholder.What are the effects of these distributions on Clio and James's incomes,Clio's AAA account,and James's basis in his stock?

Accepted Answer

Clio's income: $3,000 increase for the r

Question 7

What is required for a taxpayer to actively participate in a rental property activity to qualify for a limited deduction of losses?

Accepted Answer

The taxpayer must own at least 10 percen

Question 8

What taxes may be assessed an S corporation?

Accepted Answer

If a regular corporation makes an S elec

Question 9

Corbin has a $15,000 basis in his 50 percent ownership in an S corporation and lent the corporation $5,000 last year.The corporation has $30,000 of other debt.This year the corporation reported a $100,000 loss.How much of this loss may Corbin deduct?

Accepted Answer

A) $15,000 
B) $20,000 
C) $35,000 
D) $50,000 
A) $15,000 
B) $20,000 
C) $35,000 
D) $50,000

Question 10

How does a shareholder's basis in his or her S corporation stock change?

Accepted Answer

The basis is first determined by the amo

Which of the following is not a characteristic of sole proprietorships?

Only 50 percent or more of the shareholders of an S corporation must consent to the S election.

To qualify for the real property business exception for rental activities

To qualify for the limited deduction for rental real estate losses

What is required for a taxpayer to actively participate in a rental property activity to qualify for a limited deduction of losses?

What taxes may be assessed an S corporation?

Corbin has a $15,000 basis in his 50 percent ownership in an S corporation and lent the corporation $5,000 last year.The corporation has $30,000 of other debt.This year the corporation reported a $100,000 loss.How much of this loss may Corbin deduct?

How does a shareholder's basis in his or her S corporation stock change?

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 is not a characteristic of sole proprietorships?

Only 50 percent or more of the shareholders of an S corporation must consent to the S election.

To qualify for the real property business exception for rental activities

To qualify for the limited deduction for rental real estate losses

What is required for a taxpayer to actively participate in a rental property activity to qualify for a limited deduction of losses?

What taxes may be assessed an S corporation?

Corbin has a $15,000 basis in his 50 percent ownership in an S corporation and lent the corporation $5,000 last year.The corporation has $30,000 of other debt.This year the corporation reported a $100,000 loss.How much of this loss may Corbin deduct?

How does a shareholder's basis in his or her S corporation stock change?

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