Question 1

Partnerships and S corporations are flow-through entities.

Accepted Answer

A) True 
 B)False  True

Question 2

Kate received $140,000 in salary in 2019.What is her FICA tax if the Medicare rate is 1.45% and the Social Security rate is 6.2% on a maximum of $132,900 in 2019?

Accepted Answer

A) $10,270 
B) $10,710 
C) $10,167 
D) $10,607 
A) $10,270 
B) $10,710 
C) $10,167 
D) $10,607 A

Question 3

How much income tax must the Benton Trust pay in 2019 if its taxable income (after all deductions) is $4,600?

Accepted Answer

A) $460 
B) $690 
C) $747 
D) $1,240 
A) $460 
B) $690 
C) $747 
D) $1,240 C

Question 4

Emily is a 20% shareholder in an S corporation.Emily acquired her interest on January 1 of the current year by investing $10,000 for 20% of the corporation's stock.In March, the corporation took out a bank loan for $100,000.The corporation reported a net loss for the current year of $200,000.How much of this loss can Emily deduct on her current year's tax return?

Accepted Answer

A) $40,000 
B) $30,000 
C) $20,000 
D) $10,000 
A) $40,000 
B) $30,000 
C) $20,000 
D) $10,000

Question 5

Which of the following is normally not included in gross income?

Accepted Answer

A) Cash dividend 
B) Corporate bond interest income 
C) Stock dividend 
D) All are included in gross income 
A) Cash dividend 
B) Corporate bond interest income 
C) Stock dividend 
D) All are included in gross income

Question 6

What is included in Matt's gross income as a deductible loss for the first year if they organize the business as an S Corporation?

Accepted Answer

A) $0 
B) $7,800 
C) $16,250 
D) $24,050 
E) $24,700 
A) $0 
B) $7,800 
C) $16,250 
D) $24,050 
E) $24,700

Question 7

Jason purchased a 20 percent interest in JKL Partnership for $20,000 at the beginning of the year.At year-end, the partnership reported net income of $15,000 and distributed $2,000 cash to Jason.Assuming Jason's QBI deduction is not limited, what is the net amount taxable to Jason's this year as a result of his interest in JLK Partnership?

Accepted Answer

A) $15,000 
B) $12,000 
C) $3,000 
D) $2,400 
A) $15,000 
B) $12,000 
C) $3,000 
D) $2,400

Question 8

Which of the following best describes vertical equity?

Accepted Answer

A) All taxpayers should pay some taxes on their incomes 
B) As income increases, taxes should increase 
C) Persons with equal incomes should pay the same amount of taxes 
D) A person with capital gains should pay less tax than a person with the same amount of salary income 
A) All taxpayers should pay some taxes on their incomes 
B) As income increases, taxes should increase 
C) Persons with equal incomes should pay the same amount of taxes 
D) A person with capital gains should pay less tax than a person with the same amount of salary income

Question 9

Mason owns 45% of an S corporation that reported net income of $105,000 for the year.During the year, $20,000 was distributed to Mason from the corporation.How much should Mason include in his gross income for the year?

Accepted Answer

A) $20,000 
B) $47,250 
C) $56,250 
D) $67,250 
A) $20,000 
B) $47,250 
C) $56,250 
D) $67,250

Question 10

What is the earliest year to which a corporation can use a net operating loss from 2019?

Accepted Answer

A) 2018 
B) The first year after 2019 the corporation's gross income exceeds its tax deductions for the year. 
C) The first year after 2021 that the corporation earns any revenues 
D) 2017 
A) 2018 
B) The first year after 2019 the corporation's gross income exceeds its tax deductions for the year. 
C) The first year after 2021 that the corporation earns any revenues 
D) 2017

Question 11

Which of the following types of taxes is not levied by the U.S.government?

Accepted Answer

A) Excise tax 
B) Income tax 
C) Value added tax 
D) Gift tax 
A) Excise tax 
B) Income tax 
C) Value added tax 
D) Gift tax

Question 12

A flat tax generally would be considered a regressive tax.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not a characteristic of both S corporations and partnerships?

Accepted Answer

A) Both are flow through entities 
B) Owners increase basis for debt undertaken by an S corporation or partnership 
C) Both forms limit owner's participation in tax-free fringe benefits 
D) Owners increase basis for gains and decrease basis for losses 
A) Both are flow through entities 
B) Owners increase basis for debt undertaken by an S corporation or partnership 
C) Both forms limit owner's participation in tax-free fringe benefits 
D) Owners increase basis for gains and decrease basis for losses

Question 14

What is Matt's basis at the end of the first year if they organize the business as a partnership?

Accepted Answer

A) $0 
B) $650 
C) $7,800 
D) $24,050 
E) ($650) 
A) $0 
B) $650 
C) $7,800 
D) $24,050 
E) ($650)

Question 15

A hidden tax is one that is included with a payment but not specifically identified.

Accepted Answer

A) True 
 B)False

Question 16

Ted owns 20% of Genco (a C corporation) that had taxable income of $100,000 and paid a total of $50,000 in dividends to its shareholders.Ted also owns 10% of Subco (an S corporation) that had $100,000 of taxable income and distributed a total of $60,000 to its shareholders.How much must Ted include in his gross income as a result of being a shareholder in these two corporations?

Accepted Answer

A) $16,000 
B) $20,000 
C) $26,000 
D) $30,000 
A) $16,000 
B) $20,000 
C) $26,000 
D) $30,000

Question 17

What is George's gross income if he has the following: $78,000 salary, $4,000 dividend income, $2,000 interest income on city of San Francisco bonds, a gain of $14,000 on a stock sale, and a $4,000 operating loss on a small sole proprietorship that he owns?

Accepted Answer

A) $78,000 
B) $84,000 
C) $92,000 
D) $96,000 
A) $78,000 
B) $84,000 
C) $92,000 
D) $96,000

Question 18

What is Matt's stock basis at the end of the second year if they organize the business as an S corporation?

Accepted Answer

A) $0 
B) $11,700 
C) $28,600 
D) $33,800 
E) $44,850 
A) $0 
B) $11,700 
C) $28,600 
D) $33,800 
E) $44,850

Question 19

What is included in Jerry's gross income as a deductible loss in the first year if they organize the business as a partnership?

Accepted Answer

A) $4,200 
B) $8,750 
C) $12,950 
D) $13,300 
E) $19,000 
A) $4,200 
B) $8,750 
C) $12,950 
D) $13,300 
E) $19,000

Question 20

Mason owns 45% of an S corporation that reported net income of $105,000 for the year.During the year, $20,000 was distributed to Mason from the corporation.Assuming Mason's QBI deduction is not limited, how much is the net amount that Mason is taxed on this year as a result of his investment in the S corporation?

Accepted Answer

A) $16,000 
B) $37,800 
C) $45,000 
D) $53,800 
A) $16,000 
B) $37,800 
C) $45,000 
D) $53,800

Partnerships and S corporations are flow-through entities.

Kate received $140,000 in salary in 2019.What is her FICA tax if the Medicare rate is 1.45% and the Social Security rate is 6.2% on a maximum of $132,900 in 2019?

How much income tax must the Benton Trust pay in 2019 if its taxable income (after all deductions) is $4,600?

Which of the following is normally not included in gross income?

What is included in Matt's gross income as a deductible loss for the first year if they organize the business as an S Corporation?

Which of the following best describes vertical equity?

Mason owns 45% of an S corporation that reported net income of $105,000 for the year.During the year, $20,000 was distributed to Mason from the corporation.How much should Mason include in his gross income for the year?

What is the earliest year to which a corporation can use a net operating loss from 2019?

Which of the following types of taxes is not levied by the U.S.government?

A flat tax generally would be considered a regressive tax.

Which of the following is not a characteristic of both S corporations and partnerships?

What is Matt's basis at the end of the first year if they organize the business as a partnership?

A hidden tax is one that is included with a payment but not specifically identified.

What is George's gross income if he has the following: $78,000 salary, $4,000 dividend income, $2,000 interest income on city of San Francisco bonds, a gain of $14,000 on a stock sale, and a $4,000 operating loss on a small sole proprietorship that he owns?

What is Matt's stock basis at the end of the second year if they organize the business as an S corporation?

What is included in Jerry's gross income as a deductible loss in the first year if they organize the business as a partnership?

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

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters

Exam 1: Introduction to Taxation

Partnerships and S corporations are flow-through entities.

Kate received $140,000 in salary in 2019.What is her FICA tax if the Medicare rate is 1.45% and the Social Security rate is 6.2% on a maximum of $132,900 in 2019?

How much income tax must the Benton Trust pay in 2019 if its taxable income (after all deductions) is $4,600?

Which of the following is normally not included in gross income?

What is included in Matt's gross income as a deductible loss for the first year if they organize the business as an S Corporation?

Which of the following best describes vertical equity?

Mason owns 45% of an S corporation that reported net income of $105,000 for the year.During the year, $20,000 was distributed to Mason from the corporation.How much should Mason include in his gross income for the year?

What is the earliest year to which a corporation can use a net operating loss from 2019?

Which of the following types of taxes is not levied by the U.S.government?

A flat tax generally would be considered a regressive tax.

Which of the following is not a characteristic of both S corporations and partnerships?

What is Matt's basis at the end of the first year if they organize the business as a partnership?

A hidden tax is one that is included with a payment but not specifically identified.

What is George's gross income if he has the following: $78,000 salary, $4,000 dividend income, $2,000 interest income on city of San Francisco bonds, a gain of $14,000 on a stock sale, and a $4,000 operating loss on a small sole proprietorship that he owns?

What is Matt's stock basis at the end of the second year if they organize the business as an S corporation?

What is included in Jerry's gross income as a deductible loss in the first year if they organize the business as a partnership?

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

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters