Exam 15: Comparative Forms of Doing Business

Actual dividends paid to shareholders result in double taxation.Likewise,deemed dividends (e.g.,free use of corporate assets by a shareholder)result in double taxation.

Section 1244 ordinary loss treatment is available to shareholders in a C corporation but not to those in an S corporation.

If an S corporation distributes appreciated property as a dividend,it must recognize gain as to the appreciation.

Which of the following statements is correct?

Duck,Inc.,is a C corporation that is not eligible for the small business exception to the AMT.Its adjusted current earnings (ACE)and unadjusted alternative minimum taxable income (unadjusted AMTI)for 2013 and 2014 are as follows: Calculate the amount of the ACE adjustment for 2013 and 2014.

Anne contributes property to the TCA Partnership which was formed 8 years ago by Clark and Tara.Anne's basis for the property is $90,000 and the fair market value is $220,000.Anne receives a 25% interest for her contribution.Because the TCA Partnership is unsuccessful in having the property rezoned from agricultural to commercial,it sells the property 14 months later for $225,000.

An S corporation election for Federal income tax purposes also is effective for all states' income tax purposes.

If an individual contributes an appreciated personal use asset to a C corporation in a transaction which qualifies for nonrecognition treatment under § 351,the corporation's basis in the asset is the same as was the shareholder's adjusted basis.

Arnold purchases a building for $750,000 which is going to be used by his wholly-owned corporation.Which of the following statements are correct?

List some techniques which can be used to avoid and/or reduce double taxation for a C corporation.

Trolette contributes property with an adjusted basis of $80,000 and a fair market value of $100,000 to a newly formed business entity.If the entity is a C corporation and the transaction qualifies under § 351,the corporation's basis for the property and the shareholder's basis for the stock are: Asset Basis Stock Basis

Abby is a limited partner in a limited partnership.Her basis in the partnership interest is $80,000 with an at-risk basis of $75,000.Abby's share of the partnership loss for the tax year is $90,000.She has other income of $275,000.

Which of the following are "reasonable needs" that will help a corporation in avoiding the accumulated earnings tax?

Included among the factors that influence the choice of the form of a business entity are the following: Evaluate the validity of the statement.

Under what circumstances,if any,do the § 469 passive activity loss rules apply to C corporations?

For a limited liability company with 100 unrelated owners:

Making distributions to shareholders that are deductible by the C corporation can reduce or eliminate double taxation.

Why does stock redemption treatment for an individual shareholder produce more favorable tax consequences than a dividend?

In its first year of operations (2013),Lavender,Inc.(a C corporation)has gross receipts of $8 million and net income of $2 million.Lavender is not subject to the AMT for 2013.

After a § 721 contribution by a partner to a partnership,the partner's basis for his or her ownership interest is the same as the basis of the assets contributed (no liabilities are involved).