Question 1

Which of the following is not a characteristic of a partnership?

Accepted Answer

A)  Must be formed under state law 
B)  Formation is generally tax free except for services received for a partnership interest 
C)  Distributions of entity income are tax-free 
D)  Loss is never recognized on a nonliquidating distribution 
A)  Must be formed under state law 
B)  Formation is generally tax free except for services received for a partnership interest 
C)  Distributions of entity income are tax-free 
D)  Loss is never recognized on a nonliquidating distribution

Question 2

Other Objective Questions
Indicate by a PRP if the characteristic applies to a sole proprietorship, an SC if it applies to an S corporation, and a PAR if it applies to a partnership, and N if it does not apply to any of the three businesses. A characteristic can apply to more than one entity; write a brief explanation if a characteristic may only apply under certain conditions.
-Owners may participate in all tax-free employee fringe benefits.

Accepted Answer

The answer of Other Objective Questions
Indicate by a PRP if...

Question 3

For 2018, compare the income and FICA or self-employment tax burdens only for a couple in the 35 percent marginal income tax bracket who jointly own a business with $120,000 of operating income, if the business is a partnership or if it is an S corporation. The husband and wife each take $50,000 out of the business as salary.

Accepted Answer

For 2018:
Partnership: SE tax: ($60,000

Question 4

Leo is a 50% shareholder in Small Corporation, an S Corporation from its incorporation. Leo receives a property distribution when his basis in his Small stock is $45,000. The property distributed has a fair market value of $45,000 and a basis to Small Corporation of $25,000. What is the gain recognized by Small Corporation as a result of the distribution and what is Leo's basis for the property he received?

Accepted Answer

A)  0 gain and $25,000 basis 
B)  0 gain and $45,000 basis 
C)  $20,000 gain and $25,000 basis 
D)  $20,000 gain and $45,000 basis 
A)  0 gain and $25,000 basis 
B)  0 gain and $45,000 basis 
C)  $20,000 gain and $25,000 basis 
D)  $20,000 gain and $45,000 basis

Question 5

Limited liability companies are generally taxed as partnerships unless the company elects to be taxed as a corporation.

Accepted Answer

A) True 
 B)False

Question 6

The entity concept of a partnership views the partnership as separate from the partners and permits certain transactions between the partner and the partnership.

Accepted Answer

A) True 
 B)False

Question 7

Other Objective Questions
Indicate by a PRP if the characteristic applies to a sole proprietorship, an SC if it applies to an S corporation, and a PAR if it applies to a partnership, and N if it does not apply to any of the three businesses. A characteristic can apply to more than one entity; write a brief explanation if a characteristic may only apply under certain conditions.
-Owner may deduct losses if there is basis because of loans to the entity by the owner.

Accepted Answer

The answer of Other Objective Questions
Indicate by a PRP if...

Question 8

When may a partner recognize gain on a nonliquidating distribution from the partnership?

Accepted Answer

A partner recognizes gain on a

Question 9

What taxes may be assessed an S corporation?

Accepted Answer

If a regular corporation makes an S elec

Question 10

Ray, Ronnie and Joe are partners in a limited partnership. Ray and Ronnie, the limited partners, each own 45 percent of the partnership and Joe, the general partner, owns the other 10 percent. The partnership incurs $50,000 of nonrecourse debt and $100,000 of recourse debt. What is the effect on Joe's basis for these debts?

Accepted Answer

A)  Increases by $155,000 
B)  Increases by $105,000 
C)  Increases by $100,000 
D)  Increases by $15,000 
A)  Increases by $155,000 
B)  Increases by $105,000 
C)  Increases by $100,000 
D)  Increases by $15,000

Question 11

What restrictions are placed on an S corporation to be able to make a valid S election?

Accepted Answer

To elect S status, a corporation must be

Question 12

A limited partnership must have a general partner.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not a characteristic of a partnership?

Accepted Answer

A)  Must meet 80 percent control requirement for formation to be tax free 
B)  Cash distributions to partners may be taxable 
C)  Loss is only recognized on liquidating distributions 
D)  General partners' salaries are subject to FICA taxes. 
A)  Must meet 80 percent control requirement for formation to be tax free 
B)  Cash distributions to partners may be taxable 
C)  Loss is only recognized on liquidating distributions 
D)  General partners' salaries are subject to FICA taxes.

Which of the following is not a characteristic of a partnership?

Limited liability companies are generally taxed as partnerships unless the company elects to be taxed as a corporation.

The entity concept of a partnership views the partnership as separate from the partners and permits certain transactions between the partner and the partnership.

When may a partner recognize gain on a nonliquidating distribution from the partnership?

What taxes may be assessed an S corporation?

What restrictions are placed on an S corporation to be able to make a valid S election?

A limited partnership must have a general partner.

Which of the following is not a characteristic of a partnership?

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Estates, Gifts, and Trusts

Filters

Exam 11: Sole Proprietorships and Flow-Through Entities

Which of the following is not a characteristic of a partnership?

Limited liability companies are generally taxed as partnerships unless the company elects to be taxed as a corporation.

The entity concept of a partnership views the partnership as separate from the partners and permits certain transactions between the partner and the partnership.

When may a partner recognize gain on a nonliquidating distribution from the partnership?

What taxes may be assessed an S corporation?

What restrictions are placed on an S corporation to be able to make a valid S election?

A limited partnership must have a general partner.

Which of the following is not a characteristic of a partnership?

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Estates, Gifts, and Trusts

Filters