Exam 15: Comparative Forms of Doing Business

A limited partner in a limited partnership has limited liability whereas a general partner in a limited partnership has unlimited liability unless the limited partners agree that the general partner will have limited liability.

Doris is going to invest $90,000 in a business entity.She will manage the business entity.Her projected share of the loss for the first year is $36,000.Doris' marginal tax rate is 33%.Determine the cash flow benefit of the loss to Doris if the business form is:

Fred and Ella are going to establish a business.They expect the business to be very successful in the long-run,but project losses of approximately $100,000 for each of the first five years.Due to potential environmental concerns,limited liability is a requisite for the owners.Which form of business entity should they select?

Marsha is going to contribute the following assets to a business entity in exchange for an ownership interest. What are the tax consequences of the contribution to Marsha if the business entity is a(n): a. Sole proprietorship? b. General partnerslrip? c. Limited partnership? d. C corporation? e. S corporation?

Each of the following can pass profits and losses through to the owners: general partnership,limited partnership,S corporation,and limited liability company.

The profits of a business owned by Taylor (60%)and Maggie (40%)for the current tax year are $100,000.If the business is a C corporation or an S corporation,there is no effect on Taylor's basis in her stock.If the business is a partnership or an LLC,Taylor's basis in her partnership interest or basis in her stock is increased by $60,000.

A corporation may alternate between S corporation and C corporation status each year,depending on which results in more tax savings.

Amos contributes land with an adjusted basis of $150,000 and a fair market value of $200,000 to White,Inc.,an S corporation,in exchange for 50% of the stock of White,Inc.Carol contributes cash of $200,000 for the other 50% of the stock.If White later sells the land for $225,000,$62,500 [$50,000 + 50%($25,000)] is allocated to Amos and $12,500 ($25,000 ´ 50%)is allocated to Carol.

Dudley has a 20% ownership interest in a business for which his basis is $100,000.During the year,the entity earns profits of $90,000 and makes cash distributions to the owners of $50,000.How do these transactions affect Dudley's basis if: c. The entity is a C corporation? b. The entity is a general partnership? c. The entity is an S corporation.

In the sale of a partnership,does the way the sale is structured (i.e.,sale of the partnership interests versus the sale of the partnership assets)produce different tax consequences for the sellers?

Ralph owns all the stock of Silver,Inc.,a C corporation for which his adjusted basis is $225,000.Ralph founded Silver 12 years ago.The assets and liabilities of Silver are as follows: *Accumulated depreciation of $55,000 has been deducted. Ralph has agreed to sell the business to Marilyn and they have agreed on a purchase price of $350,000 less any outstanding liabilities.They are both in the 35% tax bracket,and Silver is in the 34% tax bracket.

John wants to buy a business whose assets have appreciated in value.If the business is operated as a C corporation,it does not matter to John whether he purchases the assets or the stock.

To which of the following entities does the AMT apply? Sole proprietorship. General partnership Limited partnership LLC. S corporation C corporation

A sole proprietorship files Schedule C of Form 1040,a partnership files Form 1065,a C corporation files Form 1120,and an S corporation files Form 1120S.

For a C corporation to be classified as a personal service corporation (PSC)for § 469 purposes,what requirements must be satisfied?

Meg has an adjusted basis of $150,000 for her 40% ownership interest.During the year,the entity earns a profit of $100,000 and liabilities increased by $70,000.Determine Meg's adjusted basis for her ownership interest.

Which of the following statements is correct?

Blue,Inc.,has taxable income before salary payments to its president of $700,000 in 2013.Blue is in the 34% tax bracket,and the president is in the 35% tax bracket.

To the extent of built-in gain or built-in loss at the time of contribution,partnerships may choose to allocate or not allocate this built-in gain or loss to the contributing partner on the sale of the contributed property by the partnership.

List some techniques for reducing and/or avoiding double taxation by making distributions to the shareholders that are deductible to the corporation.