Question 1

_____ 16.Only 50 percent or more of the shareholders of an S corporation must consent to the S election.

Accepted Answer

A) True 
 B)False  False

Question 2

Candi purchased a 10 percent limited partnership interest in rental property for $30,000.The partnership has a $1,300,000 mortgage that is secured by the building.During the current year,the partnership reports a total loss of $200,000 from the rental building.What is Candi's deductible loss and the amount of her loss carryover if her only other income/loss items are $50,000 in salary,an $8,000 capital loss on some stock,and $5,000 of bond interest income?

Accepted Answer

Candi has sufficient basis and is at-risk (as this is real property)for an amount exceeding her $20,000 allocated loss from the rental building.Candi,however,has no passive income against which to deduct her $20,000 share of the passive loss,however.Thus,she has no deduction and a $20,000 passive loss carryover.

Question 3

Simpco,an S corporation,has gross operating revenue of $450,000,cost of sales of $150,000,salaries and FICA taxes for 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 corporation's net income and its separately stated items?

Accepted Answer

$450,000 - $150,000 - $40,000 - $10,000 depreciation = $250,000 S corporation net income
Separately stated items: $25,000 Section 179;$4,000 long-term capital loss;$2,000 interest income;$500 charitable contribution

Question 4

_____ 3.The limited liability partnership form of business offers partners protection from partnership debts.

Accepted Answer

A) True 
 B)False

Question 5

Refer to the information in the preceding problem.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 6

A and B are equal shareholders in AB,a calendar-year S corporation.On June 30,A sells one-half of her stock to C.The corporation reports $30,000 of income for the year.How much of this income is allocated to A,B,and C?

Accepted Answer

The answer of A and B are equal shareholders in...

Question 7

_____ 13.A person satisfies material participation requirements only through current activity.

Accepted Answer

A) True 
 B)False

Question 8

Wilhelmina operates a daycare center in her home as a sole proprietorship.She has gross revenues of $15,000 and the following expenses: Cost of food $1,200;allocated costs of using the home $900;allowable depreciation $500;reasonable salary for her 16 year old daughter for after-school help $3,000.

Accepted Answer

A) Determine Wilhelmina's net income from the sole proprietorship in 2013. 
B) Determine Wilhelmina's total of self-employment and income taxes if her marginal tax rate is 25 percent. 
A) Determine Wilhelmina's net income from the sole proprietorship in 2013. 
B) Determine Wilhelmina's total of self-employment and income taxes if her marginal tax rate is 25 percent.

Question 9

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 10

ABC Partnership has two assets: inventory (fair market value = $20,000;basis = $25,000)and land (fair market value = $100,000;basis = $50,000)when Janine sells her 40 percent interest in ABC with a $30,000 basis for $48,000.What is the amount and type of Janine's gain or loss on the sale of her partnership interest?

Accepted Answer

.4 ($20,000 - $25,000)= $2,000

Question 11

The LBJ Partnership has a March 31 year-end.It has three equal partners,L with a June 30 year-end,B with a January 31 year-end,and J with a December 31 year-end.What are the year-end dates for the tax returns of the partners that will include their shares of the partnership's income as of March 31,2013?

Accepted Answer

L: June 30,2013
B: J

Question 12

_____ 6.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 13

_____ 4.The owners of a limited liability company are called members.

Accepted Answer

A) True 
 B)False

Question 14

_____ 19.S corporations never pay any income taxes.

Accepted Answer

A) True 
 B)False

Question 15

For 2013,compare the income and FICA or self-employment tax burdens of a couple in the 33 percent marginal income tax bracket who jointly own a business with $120,000 of operating income if the business is a partnership or an S corporation.The husband and wife each take $50,000 out of the business as salary.

Accepted Answer

For 2013:
Partnership: SE tax: ($60,000

Question 16

The Walden Partnership has two 20 percent general partners and six 10 percent limited partners.During the current year,the partnership paid off $50,000 of notes payable,purchased machinery for $100,000 on a nonrecourse note,borrowed $20,000 for working capital,and had $80,000 income from operations.

Accepted Answer

A) If the general partners each had a basis of $30,000 in the partnership interests at the beginning of the year,what is each general partner's year-end basis? 
B) If one of the limited partners had a $10,000 basis at the beginning of the year,what is his year-end basis? 
A) If the general partners each had a basis of $30,000 in the partnership interests at the beginning of the year,what is each general partner's year-end basis? 
B) If one of the limited partners had a $10,000 basis at the beginning of the year,what is his year-end basis?

Question 17

_____ 1.A sole proprietorship must use the cash method of accounting.

Accepted Answer

A) True 
 B)False

Question 18

_____ 7.A limited liability company that has only one member must be taxed as a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 19

_____ 8.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 20

_____ 17.An S corporation shareholder can only deduct losses of the S corporation if he or she has positive stock basis.

Accepted Answer

A) True 
 B)False

_____ 16.Only 50 percent or more of the shareholders of an S corporation must consent to the S election.

_____ 3.The limited liability partnership form of business offers partners protection from partnership debts.

A and B are equal shareholders in AB,a calendar-year S corporation.On June 30,A sells one-half of her stock to C.The corporation reports $30,000 of income for the year.How much of this income is allocated to A,B,and C?

_____ 13.A person satisfies material participation requirements only through current activity.

Wilhelmina operates a daycare center in her home as a sole proprietorship.She has gross revenues of $15,000 and the following expenses: Cost of food $1,200;allocated costs of using the home $900;allowable depreciation $500;reasonable salary for her 16 year old daughter for after-school help $3,000.

_____ 6.Limited liability companies are generally taxed as partnerships unless the company elects to be taxed as a corporation.

_____ 4.The owners of a limited liability company are called members.

_____ 19.S corporations never pay any income taxes.

The Walden Partnership has two 20 percent general partners and six 10 percent limited partners.During the current year,the partnership paid off $50,000 of notes payable,purchased machinery for $100,000 on a nonrecourse note,borrowed $20,000 for working capital,and had $80,000 income from operations.

_____ 1.A sole proprietorship must use the cash method of accounting.

_____ 7.A limited liability company that has only one member must be taxed as a sole proprietorship.

_____ 8.The entity concept of a partnership views the partnership as separate from the partners and permits certain transactions between the partner and the partnership.

_____ 17.An S corporation shareholder can only deduct losses of the S corporation if he or she has positive stock basis.

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

_____ 16.Only 50 percent or more of the shareholders of an S corporation must consent to the S election.

_____ 3.The limited liability partnership form of business offers partners protection from partnership debts.

A and B are equal shareholders in AB,a calendar-year S corporation.On June 30,A sells one-half of her stock to C.The corporation reports $30,000 of income for the year.How much of this income is allocated to A,B,and C?

_____ 13.A person satisfies material participation requirements only through current activity.

Wilhelmina operates a daycare center in her home as a sole proprietorship.She has gross revenues of $15,000 and the following expenses: Cost of food $1,200;allocated costs of using the home $900;allowable depreciation $500;reasonable salary for her 16 year old daughter for after-school help $3,000.

_____ 6.Limited liability companies are generally taxed as partnerships unless the company elects to be taxed as a corporation.

_____ 4.The owners of a limited liability company are called members.

_____ 19.S corporations never pay any income taxes.

_____ 1.A sole proprietorship must use the cash method of accounting.

_____ 7.A limited liability company that has only one member must be taxed as a sole proprietorship.

_____ 8.The entity concept of a partnership views the partnership as separate from the partners and permits certain transactions between the partner and the partnership.

_____ 17.An S corporation shareholder can only deduct losses of the S corporation if he or she has positive stock basis.

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