Question 1

For tax purposes,only unincorporated entities can be considered to be disregarded entities.

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 4

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 5

General partnerships are legally formed by filing a partnership agreement with the state in which the partnership will be formed.

Accepted Answer

A) True 
 B)False

Question 6

An S corporation shareholder who is not a passive investor is allowed to deduct a business loss allocation from the S corporation to the extent of the shareholder's basis in the stock no matter how large the loss.

Accepted Answer

A) True 
 B)False

Question 7

In its first year of existence (2018),Aspen Corp.(a C corporation)reported a loss for tax purposes of $60,000.In 2019,it reports a $40,000 loss.For 2020,it reports taxable income from operations of $120,000.How much tax will Aspen Corp.pay for year 3?

Accepted Answer

The answer of In its first year of existence (2018),Aspen...

Question 8

What is the maximum number of unrelated shareholders a C corporation can have,the maximum number of unrelated shareholders an S corporation can have,and the maximum number of partners a partnership may have,respectively?

Accepted Answer

A) 100; no limit; no limit 
B) no limit; 100; 2 
C) no limit; 100; no limit 
D) 100; 100; no limit 
A) 100; no limit; no limit 
B) no limit; 100; 2 
C) no limit; 100; no limit 
D) 100; 100; no limit

Question 9

S corporation shareholders are subject to self-employment tax on business income allocations from the S corporation if they are actively involved in the S corporation's business.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Sole proprietorships are not treated as legal entities separate from their individual owners.

Accepted Answer

A) True 
 B)False

Question 12

Business income allocations from an S corporation to its shareholders are potentially subject to the 3.8 percent net investment income tax if the shareholders are passive investors in the S corporation.

Accepted Answer

A) True 
 B)False

Question 13

The excess loss limitations apply to owners of all of the following entities except which of the following?

Accepted Answer

A) C corporations 
B) S corporations 
C) Entities taxed as partnerships 
D) Single-member LLCs (owned by an individual taxpayer) 
A) C corporations 
B) S corporations 
C) Entities taxed as partnerships 
D) Single-member LLCs (owned by an individual taxpayer)

Question 14

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.

Question 15

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 16

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 17

Unincorporated entities with only one individual owner are taxed as sole proprietorships.

Accepted Answer

A) True 
 B)False

Question 18

Which legal entity is generally best suited for going public?

Accepted Answer

A) Corporation. 
B) LLC. 
C) Limited liability partnership. 
D) General partnership. 
E) All of these entities are equally suited for going public. 
A) Corporation. 
B) LLC. 
C) Limited liability partnership. 
D) General partnership. 
E) All of these entities are equally suited for going public.

Question 19

S corporations have more restrictive ownership requirements than other entities.

Accepted Answer

A) True 
 B)False

Question 20

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...

Exam 15: Entities Overview

For tax purposes,only unincorporated entities can be considered to be disregarded entities.

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

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

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

General partnerships are legally formed by filing a partnership agreement with the state in which the partnership will be formed.

An S corporation shareholder who is not a passive investor is allowed to deduct a business loss allocation from the S corporation to the extent of the shareholder's basis in the stock no matter how large the loss.

In its first year of existence (2018),Aspen Corp.(a C corporation)reported a loss for tax purposes of $60,000.In 2019,it reports a $40,000 loss.For 2020,it reports taxable income from operations of $120,000.How much tax will Aspen Corp.pay for year 3?

What is the maximum number of unrelated shareholders a C corporation can have,the maximum number of unrelated shareholders an S corporation can have,and the maximum number of partners a partnership may have,respectively?

S corporation shareholders are subject to self-employment tax on business income allocations from the S corporation if they are actively involved in the S corporation's business.

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

Sole proprietorships are not treated as legal entities separate from their individual owners.

Business income allocations from an S corporation to its shareholders are potentially subject to the 3.8 percent net investment income tax if the shareholders are passive investors in the S corporation.

The excess loss limitations apply to owners of all of the following entities except which of the following?

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

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?

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.

Unincorporated entities with only one individual owner are taxed as sole proprietorships.

Which legal entity is generally best suited for going public?

S corporations have more restrictive ownership requirements than other entities.

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?

An Introduction to Tax

Tax Compliance,the Irs,and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview,dependents,and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income,deductions,and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

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 Ustaxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters