Question 1

Match the following.
-C corporation

Accepted Answer

A) Contribution of appreciated property to the business entity by an owner is never subject to taxation. 
B) Realized gains on the contribution of appreciated property to the entity are not recognized by the contributor when an 80% control requirement is satisfied. 
C) Realized losses on the contribution of loss property to the entity are never recognized by the contributor. 
D) Realized losses on the contribution of loss property to the entity are recognized by the contributor unless an 80% control requirement is satisfied. 
E) Basis of ownership interest to the owner is dependent on whether gain or loss is recognized to the owner on the contribution of assets to the business entity. 
A) Contribution of appreciated property to the business entity by an owner is never subject to taxation. 
B) Realized gains on the contribution of appreciated property to the entity are not recognized by the contributor when an 80% control requirement is satisfied. 
C) Realized losses on the contribution of loss property to the entity are never recognized by the contributor. 
D) Realized losses on the contribution of loss property to the entity are recognized by the contributor unless an 80% control requirement is satisfied. 
E) Basis of ownership interest to the owner is dependent on whether gain or loss is recognized to the owner on the contribution of assets to the business entity.

Question 2

Kristine owns all of the stock of a C corporation which owns the following assets. $\begin{array}{lrr}&\text { Adjusted Basis Fair }&\text { Market Value }\
\text { Accounts receivable } & \$-0- & \$ 60,000 \
\text { Inventory } & 20,000 & 30,000 \
\text { Machinery and equipment* } & 50,000 & 90,000 \
\text { Buil dings** } & 120,000 & 170,000 \
\text { Land } & 80,000 & 140,000 \
& \$ 270,000 & \$ 490,000
\end{array}$ * Potential § 1245 recapture of $45,000. ** Straight-line depreciation was used.
Her adjusted basis for her stock is $270,000.Calculate Kristine's recognized gain or loss and classify it as capital or ordinary if she sells her stock for $500,000.

Accepted Answer

A) $230,000 ordinary income. 
B) $230,000 capital gain. 
C) $115,000 ordinary income and $115,000 capital gain. 
D) ?$110,000 ordinary income and $120,000 capital gain. 
A) $230,000 ordinary income. 
B) $230,000 capital gain. 
C) $115,000 ordinary income and $115,000 capital gain. 
D) ?$110,000 ordinary income and $120,000 capital gain.

Question 3

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.

Accepted Answer

A) True 
 B)False

Question 4

Do the at-risk rules apply to partnerships, LLCs, and S corporations?

Accepted Answer

The statutory language of § 465 does not

Question 5

Mr.and Ms.Smith's partnership owns the following assets. $\begin{array}{lrr}&\text { Adjusted Basis Fair }&\text { Market Value }\
\text { Accounts receivable } & \$-0- & \$ 60,000 \
\text { Inventory } & 20,000 & 30,000 \
\text { Machinery and equipment* } & 50,000 & 90,000 \
\text { Buil dings** } & 120,000 & 170,000 \
\text { Land } & 80,000 & 140,000 \
& \$ 270,000 & \$ 490,000
\end{array}$ * Potential § 1245 recapture of $45,000. ** Straight-line depreciation was used.
Mr)and Ms.Smith each have a basis for their partnership interest of $135,000.Calculate their combined recognized gain or loss and classify it as capital or ordinary if they sell their partnership interests for $500,000.

Accepted Answer

A) $230,000 ordinary income. 
B) $230,000 capital gain. 
C) $115,000 ordinary income and $115,000 capital gain. 
D) $110,000 ordinary income and $120,000 capital gain. 
A) $230,000 ordinary income. 
B) $230,000 capital gain. 
C) $115,000 ordinary income and $115,000 capital gain. 
D) $110,000 ordinary income and $120,000 capital gain.

Question 6

C corporations and S corporations can generate an AMT adjustment known as Adjusted Current Earnings (ACE).

Accepted Answer

A) True 
 B)False

Question 7

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: ​ $\begin{array}{ll}\text { Asset Basis }&\text { Stock Basis }\
a.\$ 80,000 & \$ 100,000 \
b.\$ 100,000 & \$ 80,000 \
c.\$ 80,000 & \$ 80,000 \
d.\$ 100,000 & \$ 100,000
\end{array}$

Accepted Answer

The answer of Trolette contributes property with an adjusted basis...

Question 8

With respect to special allocations, is the S corporation treated more like a partnership or a C corporation?

Accepted Answer

With respect to special allocations, an

Question 9

From the viewpoint of the entity and the employee recipient, what is the ideal fringe benefit?

Accepted Answer

The ideal fringe benefit is on

Question 10

Match the following attributes with the different forms.A particular attribute may apply to more than one entity form.
-C corporation

Accepted Answer

A) Ability of all owners to have limited liability. 
B) Ability to pass tax attributes through to the owners. 
C) Right of all owners to participate in the management of the business. 
D) Number of owners is limited.e.Ability to have multiple owners. 
A) Ability of all owners to have limited liability. 
B) Ability to pass tax attributes through to the owners. 
C) Right of all owners to participate in the management of the business. 
D) Number of owners is limited.e.Ability to have multiple owners.

Question 11

Match the following.
-Limited partnership

Accepted Answer

A) Contribution of appreciated property to the business entity by an owner is never subject to taxation. 
B) Realized gains on the contribution of appreciated property to the entity are not recognized by the contributor when an 80% control requirement is satisfied. 
C) Realized losses on the contribution of loss property to the entity are never recognized by the contributor. 
D) Realized losses on the contribution of loss property to the entity are recognized by the contributor unless an 80% control requirement is satisfied. 
E) Basis of ownership interest to the owner is dependent on whether gain or loss is recognized to the owner on the contribution of assets to the business entity. 
A) Contribution of appreciated property to the business entity by an owner is never subject to taxation. 
B) Realized gains on the contribution of appreciated property to the entity are not recognized by the contributor when an 80% control requirement is satisfied. 
C) Realized losses on the contribution of loss property to the entity are never recognized by the contributor. 
D) Realized losses on the contribution of loss property to the entity are recognized by the contributor unless an 80% control requirement is satisfied. 
E) Basis of ownership interest to the owner is dependent on whether gain or loss is recognized to the owner on the contribution of assets to the business entity.

Question 12

Match the following statements.
-Technique for minimizing double taxation

Accepted Answer

A) Usually subject to single taxation even if the entity is incorporated. 
B) Not making distributions to shareholders. 
C) Rate for a corporate taxpayer is 20%. 
D) Subject to double taxation. 
E) Eligible for special allocations. 
A) Usually subject to single taxation even if the entity is incorporated. 
B) Not making distributions to shareholders. 
C) Rate for a corporate taxpayer is 20%. 
D) Subject to double taxation. 
E) Eligible for special allocations.

Question 13

Ling owns a sole proprietorship for which the assets have appreciated in value.If Ling is going to sell the business to Abner, should Ling structure the sale as (1) a sale of the individual assets or (2) a sale of the sole proprietorship?

Accepted Answer

The form of the sale does not matter to

Question 14

Malcomb and Sandra (shareholders) each loan Crow Corporation $50,000 at the market rate of 6% interest.Which of the following statements are false?

Accepted Answer

A) Crow may deduct the interest expense, and the interest income is taxable to Malcomb and Sandra. 
B) When the note principal is repaid, neither Malcomb nor Sandra recognizes gross income from the repayment. 
C) If the IRS were successful in reclassifying the notes as equity, the interest payments would not be deductible by Crow, and Malcomb and Sandra would still recognize income. 
D) If the IRS were successful in reclassifying the notes as equity, repayment of the note principal to Malcomb and Sandra would not qualify for return of capital treatment and would most likely result in dividend income treatment for Malcomb and Sandra. 
E) All of the above are true. 
A) Crow may deduct the interest expense, and the interest income is taxable to Malcomb and Sandra. 
B) When the note principal is repaid, neither Malcomb nor Sandra recognizes gross income from the repayment. 
C) If the IRS were successful in reclassifying the notes as equity, the interest payments would not be deductible by Crow, and Malcomb and Sandra would still recognize income. 
D) If the IRS were successful in reclassifying the notes as equity, repayment of the note principal to Malcomb and Sandra would not qualify for return of capital treatment and would most likely result in dividend income treatment for Malcomb and Sandra. 
E) All of the above are true.

Question 15

Match the following attributes with the different forms.A particular attribute may apply to more than one entity form.
-S corporation

Accepted Answer

A) Ability of all owners to have limited liability. 
B) Ability to pass tax attributes through to the owners. 
C) Right of all owners to participate in the management of the business. 
D) Number of owners is limited.e.Ability to have multiple owners. 
A) Ability of all owners to have limited liability. 
B) Ability to pass tax attributes through to the owners. 
C) Right of all owners to participate in the management of the business. 
D) Number of owners is limited.e.Ability to have multiple owners.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

The general passive activity loss rules

Question 18

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 reports other income of $275,000 from her job as a controller.How much of the $90,000 can Abby offset against her other income of $275,000? What happens to any balance that cannot be deducted in the current tax year?
​

Accepted Answer

​
​
Abby's investment in the limited par

Question 19

​The Net Investment Income Tax (NIIT) is owed by both high income individuals and Corporations.

Accepted Answer

A) True 
 B)False

Question 20

Arthur is the sole shareholder of Purple, Inc.Purple's taxable income before the payment of Arthur's salary is $300,000.Based on this information, Arthur has the corporation pay him a salary of $200,000 and a bonus of $100,000.A reasonable salary and bonus would be $175,000.Which of the following is correct?

Accepted Answer

A) The taxable income of Purple, Inc., is $0 ($300,000 - $300,000 salary and bonus). 
B) The taxable income of Purple, Inc., is $100,000 ($300,000 - $200,000). 
C) Arthur has salary and bonus income of $300,000. 
D) Arthur has salary and bonus income of $175,000 and dividend income of $125,000. 
A) The taxable income of Purple, Inc., is $0 ($300,000 - $300,000 salary and bonus). 
B) The taxable income of Purple, Inc., is $100,000 ($300,000 - $200,000). 
C) Arthur has salary and bonus income of $300,000. 
D) Arthur has salary and bonus income of $175,000 and dividend income of $125,000.

Match the following. -C corporation

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.

Do the at-risk rules apply to partnerships, LLCs, and S corporations?

C corporations and S corporations can generate an AMT adjustment known as Adjusted Current Earnings (ACE).

With respect to special allocations, is the S corporation treated more like a partnership or a C corporation?

From the viewpoint of the entity and the employee recipient, what is the ideal fringe benefit?

Match the following attributes with the different forms.A particular attribute may apply to more than one entity form. -C corporation

Match the following. -Limited partnership

Match the following statements. -Technique for minimizing double taxation

Ling owns a sole proprietorship for which the assets have appreciated in value.If Ling is going to sell the business to Abner, should Ling structure the sale as (1) a sale of the individual assets or (2) a sale of the sole proprietorship?

Malcomb and Sandra (shareholders) each loan Crow Corporation $50,000 at the market rate of 6% interest.Which of the following statements are false?

Match the following attributes with the different forms.A particular attribute may apply to more than one entity form. -S corporation

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

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

The Net Investment Income Tax (NIIT) is owed by both high income individuals and Corporations.

Introduction to Taxation

Working With the Tax Law

Taxation on the Financial Statements

Gross Income

Business Deductions

Losses and Loss Limitations

Basis, Gain and Loss, and Nontaxable Exchanges

Capital Gains and Losses

Individuals As the Taxpayers

Income, Deductions and Credits

Individuals As Employees and Proprietors

Organization, Capital Structure, and Operating Rules

Earnings Profits and Distributions

Partnerships and Limited Liability Entities

S Corporations

Multi-Juris-Dictional Taxation

Tax Credits and Corporate Alternative Minimum Tax

Filters

Exam 18: Comparative Forms of Doing Business

Match the following. -C corporation

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.

Do the at-risk rules apply to partnerships, LLCs, and S corporations?

C corporations and S corporations can generate an AMT adjustment known as Adjusted Current Earnings (ACE).

With respect to special allocations, is the S corporation treated more like a partnership or a C corporation?

From the viewpoint of the entity and the employee recipient, what is the ideal fringe benefit?

Match the following attributes with the different forms.A particular attribute may apply to more than one entity form. -C corporation

Match the following. -Limited partnership

Match the following statements. -Technique for minimizing double taxation

Ling owns a sole proprietorship for which the assets have appreciated in value.If Ling is going to sell the business to Abner, should Ling structure the sale as (1) a sale of the individual assets or (2) a sale of the sole proprietorship?

Malcomb and Sandra (shareholders) each loan Crow Corporation $50,000 at the market rate of 6% interest.Which of the following statements are false?

Match the following attributes with the different forms.A particular attribute may apply to more than one entity form. -S corporation

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

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

​The Net Investment Income Tax (NIIT) is owed by both high income individuals and Corporations.

Introduction to Taxation

Working With the Tax Law

Taxation on the Financial Statements

Gross Income

Business Deductions

Losses and Loss Limitations

Basis, Gain and Loss, and Nontaxable Exchanges

Capital Gains and Losses

Individuals As the Taxpayers

Income, Deductions and Credits

Individuals As Employees and Proprietors

Organization, Capital Structure, and Operating Rules

Earnings Profits and Distributions

Partnerships and Limited Liability Entities

S Corporations

Multi-Juris-Dictional Taxation

Tax Credits and Corporate Alternative Minimum Tax

Filters

The Net Investment Income Tax (NIIT) is owed by both high income individuals and Corporations.