Question 1

In comparing the various business organizational forms discussed in Chapter 19, which of the following statements is false?

Accepted Answer

A) Only the C corporation is a taxable entity. 
B) The original character of business revenues and expenses flows through to the owners for all organizational forms except the C corporation. 
C) Only corporate shareholders have limited liability. 
D) All owners except proprietors may enter into taxable transactions with their businesses. 
A) Only the C corporation is a taxable entity. 
B) The original character of business revenues and expenses flows through to the owners for all organizational forms except the C corporation. 
C) Only corporate shareholders have limited liability. 
D) All owners except proprietors may enter into taxable transactions with their businesses.

Question 2

Owners have includible income when appreciated property is contributed to a business that is

Accepted Answer

A) A proprietorship 
B) AC corporation in exchange for 90 percent of its stock 
C) An S corporation in exchange for 60 percent of its stock 
D) A partnership in exchange for a 40 percent capital interest 
A) A proprietorship 
B) AC corporation in exchange for 90 percent of its stock 
C) An S corporation in exchange for 60 percent of its stock 
D) A partnership in exchange for a 40 percent capital interest

Question 3

L operates a proprietorship.During the year, she transferred the following assets from personal to business use: $$\begin{array}{l}
\text { Asset}&\text { Cost}&\text { Market Value }\
\text { Car } & \$ 18,000 & \$ 12,000 \
\text { Land } & \$ 40,000 & \$ 50,000
\end{array}$$ The proprietorship's combined or total basis in these assets is

Accepted Answer

A) $52,000 
B) $58,000 
C) $62,000 
D) $68,000 
A) $52,000 
B) $58,000 
C) $62,000 
D) $68,000

Question 4

A business has the following information: Net ordinary income before the
items below are considered $\quad$$\$ 65,000$
Guaranteed compensation to $Z ( \quad18,000 )$
Rental income $\quad$20,000
Rental expenses $\quad$$( 27,000 )$
Net income $\quad \$ 40,000$ If Z performs services for the business, which of the following statements is false?

Accepted Answer

A) Z's self-employment income is $65,000 if the business is a proprietorship. 
B) Z's self-employment income is $36,800 if Z is a 40 percent shareholder of an S corporation. 
C) Z's self-employment income is $18,000 if Z is a limited partner who receives 40 percent of the profits and losses. 
D) Z has no self-employment income if Z is a 40 percent shareholder of a C corporation. 
A) Z's self-employment income is $65,000 if the business is a proprietorship. 
B) Z's self-employment income is $36,800 if Z is a 40 percent shareholder of an S corporation. 
C) Z's self-employment income is $18,000 if Z is a limited partner who receives 40 percent of the profits and losses. 
D) Z has no self-employment income if Z is a 40 percent shareholder of a C corporation.

Question 5

Fringe benefits for a 15 percent owner/employee generally are deductible by the employer but are excludable income for the employee when the employer is a

Accepted Answer

A) Proprietorship, partnership, or S or C corporation 
B) Partnership or S or C corporation 
C) S or C corporation 
D) C corporation 
A) Proprietorship, partnership, or S or C corporation 
B) Partnership or S or C corporation 
C) S or C corporation 
D) C corporation

Question 6

The business is a proprietorship owned by T.T is single and has no other tax information. Income from services $\quad$$\$ 100,000$
Net capital loss $\quad$2,200
Guaranteed compensation paid to $\mathrm { T } \quad 10,000$
Life insurance premium for $\mathrm { T }$,
payable to T's children $\quad$300
Other operating expenses $\quad 54,000$ Ignoring self-employment taxes, T's A.G.I, is

Accepted Answer

A) $33,500 
B) $33,800 
C) $36,000 
D) $43,800 
A) $33,500 
B) $33,800 
C) $36,000 
D) $43,800

Question 7

A partner may recognize a loss on the sale of equipment to a partnership in which he has a 40 percent interest.

Accepted Answer

A) True 
 B)False

Question 8

B, a sole proprietorship, has the following information for the taxable year: Net ordinary income before the 
item below is considered $\quad\$ 30,000$ 
Compensation to $\mathrm { B }$, the proprietor $\quad 10,000$ B's self-employment income is

Accepted Answer

A) $40,000 
B) $30,000 
C) $20,000 
D) $0 
A) $40,000 
B) $30,000 
C) $20,000 
D) $0

Question 9

A partnership has a $7,000 basis for proprietorship land it has just received in exchange for a 20 percent capital interest.The land had a $7,000 market value and $8,200 basis to the proprietorship.

Accepted Answer

A) True 
 B)False

Question 10

Capital gains of a partnership and an S corporation flow through to owners to be reported by them on their own tax returns.

Accepted Answer

A) True 
 B)False

In comparing the various business organizational forms discussed in Chapter 19, which of the following statements is false?

Owners have includible income when appreciated property is contributed to a business that is

L operates a proprietorship.During the year, she transferred the following assets from personal to business use: Asset Cost Market Value Car \ 18,000 \ 12,000 Land \ 40,000 \ 50,000 The proprietorship's combined or total basis in these assets is

Fringe benefits for a 15 percent owner/employee generally are deductible by the employer but are excludable income for the employee when the employer is a

A partner may recognize a loss on the sale of equipment to a partnership in which he has a 40 percent interest.

B, a sole proprietorship, has the following information for the taxable year: Net ordinary income before the item below is considered $\quad\$ 30,000$ Compensation to $\mathrm { B }$ , the proprietor $\quad 10,000$ B's self-employment income is

A partnership has a $7,000 basis for proprietorship land it has just received in exchange for a 20 percent capital interest.The land had a $7,000 market value and $8,200 basis to the proprietorship.

Capital gains of a partnership and an S corporation flow through to owners to be reported by them on their own tax returns.

An Overview of Federal Taxation

Tax Practice and Research

Taxable Entities, Tax Formula, Introduction to Property Transactions

Personal and Dependency Exemptions; Filing Status; Determination of Tax for an Individual; Filing Requirements

Gross Income

Gross Income: Inclusions and Exclusions

Overview of Deductions and Losses

Employee Business Expenses

Capital Recovery: Depreciation, Amortization, and Depletion

Certain Business Deductions and Losses

Itemized Deductions

Deductions for Certain Investment Expenses and Losses

The Alternative Minimum Tax and Tax Credits

Property Transactions: Basis Determination and Recognition of Gain or Loss

Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: Dispositions of Trade or Business Property

Employee Compensation and Retirement Plans

Filters

Exam 19: Taxation of Business Forms and Their Owners

In comparing the various business organizational forms discussed in Chapter 19, which of the following statements is false?

Owners have includible income when appreciated property is contributed to a business that is

L operates a proprietorship.During the year, she transferred the following assets from personal to business use: Asset Cost Market Value Car \ 18,000 \ 12,000 Land \ 40,000 \ 50,000 The proprietorship's combined or total basis in these assets is

Fringe benefits for a 15 percent owner/employee generally are deductible by the employer but are excludable income for the employee when the employer is a

A partner may recognize a loss on the sale of equipment to a partnership in which he has a 40 percent interest.

B, a sole proprietorship, has the following information for the taxable year: Net ordinary income before the item below is considered $30,000\quad\$ 30,000$30,000 Compensation to B\mathrm { B }B , the proprietor 10,000\quad 10,00010,000 B's self-employment income is

A partnership has a $7,000 basis for proprietorship land it has just received in exchange for a 20 percent capital interest.The land had a $7,000 market value and $8,200 basis to the proprietorship.

Capital gains of a partnership and an S corporation flow through to owners to be reported by them on their own tax returns.

An Overview of Federal Taxation

Tax Practice and Research

Taxable Entities, Tax Formula, Introduction to Property Transactions

Personal and Dependency Exemptions; Filing Status; Determination of Tax for an Individual; Filing Requirements

Gross Income

Gross Income: Inclusions and Exclusions

Overview of Deductions and Losses

Employee Business Expenses

Capital Recovery: Depreciation, Amortization, and Depletion

Certain Business Deductions and Losses

Itemized Deductions

Deductions for Certain Investment Expenses and Losses

The Alternative Minimum Tax and Tax Credits

Property Transactions: Basis Determination and Recognition of Gain or Loss

Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: Dispositions of Trade or Business Property

Employee Compensation and Retirement Plans

Filters

B, a sole proprietorship, has the following information for the taxable year: Net ordinary income before the item below is considered $\quad\$ 30,000$ Compensation to $\mathrm { B }$ , the proprietor $\quad 10,000$ B's self-employment income is