Question 1

An unincorporated entity with more than one owner is, by default, taxed as a partnership.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is true for a C corporation incurring a net operating loss (NOL) for a tax year that begins in 2019?

Accepted Answer

A)  It may carry the NOL back two years and forward 20 years. 
B)  It may not carry the NOL back to prior years but it may carry it forward 20 years. 
C)  It may not carry the NOL back to prior years but it can carry the loss forward indefinitely. 
D)  It may carry the loss back two years and carry the loss forward indefinitely. 
E)  None of the choices are correct. 
A)  It may carry the NOL back two years and forward 20 years. 
B)  It may not carry the NOL back to prior years but it may carry it forward 20 years. 
C)  It may not carry the NOL back to prior years but it can carry the loss forward indefinitely. 
D)  It may carry the loss back two years and carry the loss forward indefinitely. 
E)  None of the choices are correct.

Question 3

Rodger owns 100 percent of the shares in Trevor Inc., a C corporation. Assume the following for the current year:
   Given these assumptions, how much cash does Rodger have from the dividend after all taxes have been paid?

Accepted Answer

The answer of Rodger owns 100 percent of the shares...

Question 4

A single-member LLC is taxed as a partnership.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following legal entities are generally classified as C corporations for tax purposes?

Accepted Answer

A)  Limited liability companies. 
B)  S corporations. 
C)  Limited partnerships. 
D)  Sole proprietorships. 
E)  None of the choices are correct. 
A)  Limited liability companies. 
B)  S corporations. 
C)  Limited partnerships. 
D)  Sole proprietorships. 
E)  None of the choices are correct.

Question 6

If an individual forms a sole proprietorship, which nontax factor will be of greatest benefit to the sole proprietor?

Accepted Answer

A)  Liability protection. 
B)  Legal flexibility in defining rights and responsibilities of owners. 
C)  Facilitation of initial public offerings. 
D)  Minimal time and cost to organize. 
A)  Liability protection. 
B)  Legal flexibility in defining rights and responsibilities of owners. 
C)  Facilitation of initial public offerings. 
D)  Minimal time and cost to organize.

Question 7

S corporation shareholders are legally responsible for paying the S corporation's debts because S corporations are treated as flow-through entities for tax purposes.

Accepted Answer

A) True 
 B)False

Question 8

Sole proprietors are subject to self-employment taxes on net income from their sole proprietorships.

Accepted Answer

A) True 
 B)False

Question 9

In 2019, BYC Corporation (a C corporation) had an NOL carryover from 2017 in the amount of $40,000. How much tax will BYC pay in 2019 if it reports taxable income from operations of $35,000 in 2019 before the NOL deduction?

Accepted Answer

None. BYC's NOL of ($40,000) is availabl

Question 10

If individual taxpayers are the shareholders of PST Corporation and PST Corporation is a shareholder of MNO Corporation, how many levels of tax is MNO's pretax income potentially exposed to?

Accepted Answer

A)  No taxation. 
B)  Single taxation. 
C)  Double taxation. 
D)  Triple taxation. 
A)  No taxation. 
B)  Single taxation. 
C)  Double taxation. 
D)  Triple taxation.

Question 11

Corporations are legally formed by filing articles of organization with the state in which the corporation will be created.

Accepted Answer

A) True 
 B)False

Question 12

Jorge is a 100-percent owner of JJ LLC (taxed as an S corporation). He works full time for JJ and his marginal ordinary tax rate is 37 percent. Which of the following statements is true regarding Jorge's tax treatment of business income allocated to him from JJ?

Accepted Answer

A)  Business income allocations are subject to self-employment tax. 
B)  Business income allocations are not subject to the net investment income tax. 
C)  Business income allocations are subject to the additional Medicare tax. 
D)  Business income allocations are taxed at a maximum 23.8 percent tax rate. 
A)  Business income allocations are subject to self-employment tax. 
B)  Business income allocations are not subject to the net investment income tax. 
C)  Business income allocations are subject to the additional Medicare tax. 
D)  Business income allocations are taxed at a maximum 23.8 percent tax rate.

Question 13

Losses from C corporations are never available to offset a shareholder's personal income.

Accepted Answer

A) True 
 B)False

Question 14

Which legal entity provides the least flexible legal arrangement for owners?

Accepted Answer

A)  Corporation. 
B)  LLC. 
C)  Partnership. 
D)  Sole proprietorship. 
A)  Corporation. 
B)  LLC. 
C)  Partnership. 
D)  Sole proprietorship.

Question 15

What document must an LLC file with the state to organize its business?

Accepted Answer

A)  Articles of incorporation. 
B)  Certificate of LLC. 
C)  Articles or a certificate of organization. 
D)  Partnership agreement. 
E)  None of the choices are correct. An LLC does not have to file with the state to organize its business. 
A)  Articles of incorporation. 
B)  Certificate of LLC. 
C)  Articles or a certificate of organization. 
D)  Partnership agreement. 
E)  None of the choices are correct. An LLC does not have to file with the state to organize its business.

Question 16

Jorge is a 60-percent owner of JJ LLC (taxed as a partnership). He is a passive investor in JJ (he doesn't perform any work for JJ) and his marginal ordinary tax rate is 37 percent. Which of the following statements is true regarding Jorge's tax treatment of business income allocated to him from JJ?

Accepted Answer

A)  Business income allocations are not subject to self-employment tax. 
B)  Business income allocations are not subject to the net investment income tax. 
C)  Business income allocations are subject to the additional Medicare tax. 
D)  Business income allocations are taxed at a maximum 23.8 percent tax rate. 
A)  Business income allocations are not subject to self-employment tax. 
B)  Business income allocations are not subject to the net investment income tax. 
C)  Business income allocations are subject to the additional Medicare tax. 
D)  Business income allocations are taxed at a maximum 23.8 percent tax rate.

Question 17

Logan, a 50-percent shareholder in Military Gear Inc. (MG), is comparing the tax consequences of losses from C corporations with losses from S corporations. Assume MG has a $100,000 tax loss for the year, Logan's tax basis in his MG stock was $150,000 at the beginning of the year, and he received $75,000 ordinary income from other sources during the year. Assuming Logan's marginal tax rate is 24 percent, how much more tax will Logan pay currently if MG is a C corporation compared to the tax he would pay if it were an S corporation?

Accepted Answer

A)  $0 
B)  $6,000 
C)  $12,000 
D)  $18,000 
A)  $0 
B)  $6,000 
C)  $12,000 
D)  $18,000

Question 18

In certain circumstances, C corporation shareholders can elect to change the entity to a flow-through entity for tax purposes.

Accepted Answer

A) True 
 B)False

Question 19

Shareholders of C corporations receiving property distributions must recognize dividend income equal to the fair market value of the distributed property if the distributing corporation has sufficient earnings and profits.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following legal entities files documents with the state to be formally recognized by the state?

Accepted Answer

A)  Limited liability company. 
B)  General partnership. 
C)  Sole proprietorship (non LL
C) . 
D)  None of the choices are correct. 
A)  Limited liability company. 
B)  General partnership. 
C)  Sole proprietorship (non LL
C) . 
D)  None of the choices are correct.

An unincorporated entity with more than one owner is, by default, taxed as a partnership.

Which of the following statements is true for a C corporation incurring a net operating loss (NOL) for a tax year that begins in 2019?

Rodger owns 100 percent of the shares in Trevor Inc., a C corporation. Assume the following for the current year: Given these assumptions, how much cash does Rodger have from the dividend after all taxes have been paid?

A single-member LLC is taxed as a partnership.

Which of the following legal entities are generally classified as C corporations for tax purposes?

If an individual forms a sole proprietorship, which nontax factor will be of greatest benefit to the sole proprietor?

S corporation shareholders are legally responsible for paying the S corporation's debts because S corporations are treated as flow-through entities for tax purposes.

Sole proprietors are subject to self-employment taxes on net income from their sole proprietorships.

In 2019, BYC Corporation (a C corporation) had an NOL carryover from 2017 in the amount of $40,000. How much tax will BYC pay in 2019 if it reports taxable income from operations of $35,000 in 2019 before the NOL deduction?

If individual taxpayers are the shareholders of PST Corporation and PST Corporation is a shareholder of MNO Corporation, how many levels of tax is MNO's pretax income potentially exposed to?

Corporations are legally formed by filing articles of organization with the state in which the corporation will be created.

Jorge is a 100-percent owner of JJ LLC (taxed as an S corporation). He works full time for JJ and his marginal ordinary tax rate is 37 percent. Which of the following statements is true regarding Jorge's tax treatment of business income allocated to him from JJ?

Losses from C corporations are never available to offset a shareholder's personal income.

Which legal entity provides the least flexible legal arrangement for owners?

What document must an LLC file with the state to organize its business?

Jorge is a 60-percent owner of JJ LLC (taxed as a partnership). He is a passive investor in JJ (he doesn't perform any work for JJ) and his marginal ordinary tax rate is 37 percent. Which of the following statements is true regarding Jorge's tax treatment of business income allocated to him from JJ?

In certain circumstances, C corporation shareholders can elect to change the entity to a flow-through entity for tax purposes.

Shareholders of C corporations receiving property distributions must recognize dividend income equal to the fair market value of the distributed property if the distributing corporation has sufficient earnings and profits.

Which of the following legal entities files documents with the state to be formally recognized by the state?

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 4: Entities Overview

An unincorporated entity with more than one owner is, by default, taxed as a partnership.

Which of the following statements is true for a C corporation incurring a net operating loss (NOL) for a tax year that begins in 2019?

Rodger owns 100 percent of the shares in Trevor Inc., a C corporation. Assume the following for the current year: Given these assumptions, how much cash does Rodger have from the dividend after all taxes have been paid?

A single-member LLC is taxed as a partnership.

Which of the following legal entities are generally classified as C corporations for tax purposes?

If an individual forms a sole proprietorship, which nontax factor will be of greatest benefit to the sole proprietor?

S corporation shareholders are legally responsible for paying the S corporation's debts because S corporations are treated as flow-through entities for tax purposes.

Sole proprietors are subject to self-employment taxes on net income from their sole proprietorships.

In 2019, BYC Corporation (a C corporation) had an NOL carryover from 2017 in the amount of $40,000. How much tax will BYC pay in 2019 if it reports taxable income from operations of $35,000 in 2019 before the NOL deduction?

If individual taxpayers are the shareholders of PST Corporation and PST Corporation is a shareholder of MNO Corporation, how many levels of tax is MNO's pretax income potentially exposed to?

Corporations are legally formed by filing articles of organization with the state in which the corporation will be created.

Jorge is a 100-percent owner of JJ LLC (taxed as an S corporation). He works full time for JJ and his marginal ordinary tax rate is 37 percent. Which of the following statements is true regarding Jorge's tax treatment of business income allocated to him from JJ?

Losses from C corporations are never available to offset a shareholder's personal income.

Which legal entity provides the least flexible legal arrangement for owners?

What document must an LLC file with the state to organize its business?

In certain circumstances, C corporation shareholders can elect to change the entity to a flow-through entity for tax purposes.

Shareholders of C corporations receiving property distributions must recognize dividend income equal to the fair market value of the distributed property if the distributing corporation has sufficient earnings and profits.

Which of the following legal entities files documents with the state to be formally recognized by the state?

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters