Question 1

A benefit of an S corporation when compared with a C corporation is that it is subject to Federal income tax only in limited circumstances.

Accepted Answer

A) True 
 B)False  True

Question 2

Walter wants to sell his wholly owned C corporation, Cream, Inc. The fair market value of his stock exceeds the corporation's adjusted basis for the assets. Should Walter sell his stock or have Cream sell its assets and make a liquidating distribution to him?

Accepted Answer

Selling the stock will result in single taxation at the beneficial capital gain rate. Selling the assets will result in double taxation with only Walter's recognized gain qualifying for the beneficial capital gain rate. Therefore, Walter should sell his stock.

Question 3

A limited partnership can indirectly avoid unlimited liability of the general partner if the general partner is a corporation.

Accepted Answer

A) True 
 B)False  True

Question 4

Albert's sole proprietorship owns the following assets.   Albert sells his sole proprietorship for $500,000. Calculate Albert's recognized gain or loss and classify it as capital or ordinary.

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 5

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 6

Dudley holds a 20% ownership interest in a business for which his basis is $100,000. During the year, the entity earns profits of $90,000 and makes cash distributions of $50,000 to the owners. How do these transactions affect Dudley's basis if:

a. The entity is a C corporation?
b. The entity is a general partnership?
c. The entity is an S corporation?

Accepted Answer

stock basis.
b. If the entity is a gener

Question 7

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

Accepted Answer

The statutory language of § 465 does not

Question 8

Myra is going to contribute the following assets to a business entity in exchange for an ownership interest.   What are the tax consequences of the contribution to Myra if the business entity is an): 
a. Sole proprietorship?
b. General partnership?
c. Limited partnership?
d. C corporation?
e. S corporation?

Accepted Answer

a. Since the business entity is a sole p

Question 9

Match the following statements.
-Sale of the corporate assets by the C corporation.

Accepted Answer

A) Transaction in this form enables double taxation to be avoided. 
B) Gain or loss is calculated separately for each asset and is subject to single taxation. 
C) This is subject to double taxation. 
D) The sale is treated as the sale of a capital asset under § 741 but subject to ordinary income potential under §
751. 
E) This is not subject to double taxation on the sale of corporate stock. 
A) Transaction in this form enables double taxation to be avoided. 
B) Gain or loss is calculated separately for each asset and is subject to single taxation. 
C) This is subject to double taxation. 
D) The sale is treated as the sale of a capital asset under § 741 but subject to ordinary income potential under §
751. 
E) This is not subject to double taxation on the sale of corporate stock.

Question 10

In the sale of a partnership, how does the way the sale is structured i.e., sale of the partnership interests versus the sale of the partnership assets) produce different tax consequences for the sellers?

Accepted Answer

The sale of the partnership assets is tr

Question 11

An S corporation election for Federal income tax purposes also is effective for all states' income tax purposes.

Accepted Answer

A) True 
 B)False

Question 12

Each of the following can pass profits and losses through to the owners: general partnership, limited partnership, S
corporation, and limited liability company.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Wren, Inc. is owned by Tucker 30%) and Maribel 70%). Tucker's marginal tax rate is 22% and Maribel's marginal tax rate is 35%. Wren's taxable income for the current tax year is $300,000.
a. If Wren is an S corporation, determine the amount of the distribution that Wren would make to enable Tucker and Maribel to pay their tax liabilities associated with Wren's $300,000 taxable income.
b. If Wren is a C corporation.

Accepted Answer

a. If Wren is an S corporation, it is th

Question 15

The profits of a business owned by Taylor 60%) and Maggie 40%) for the current tax year are $100,000. If the business is a C corporation or an S corporation, there is no effect on Taylor's basis in her stock. If the business is a partnership or an LLC, Taylor's basis in her partnership interest or basis in her stock is increased by $60,000.

Accepted Answer

A) True 
 B)False

Question 16

Molly transfers land with an adjusted basis of $28,000 and a fair market value of $65,000 to the Sand Partnership for a 30% ownership interest. The land is encumbered by a mortgage of $18,000, which the partnership assumes. Her basis for her ownership interest is $10,000 $28,000 - $18,000).

Accepted Answer

A) True 
 B)False

Question 17

Match the following statements.
-Charitable contributions

Accepted Answer

A) For the corporate taxpayer, taxed using the regular tax rates. 
B) Must be capitalized, but can be amortized over 180 months. 
C) For the corporate taxpayer, the rate is 21%. 
D) For the corporate taxpayer, cannot be deducted at all in the current tax year. 
E) For the corporate taxpayer, limited to 10% of taxable income before certain deductions. 
A) For the corporate taxpayer, taxed using the regular tax rates. 
B) Must be capitalized, but can be amortized over 180 months. 
C) For the corporate taxpayer, the rate is 21%. 
D) For the corporate taxpayer, cannot be deducted at all in the current tax year. 
E) For the corporate taxpayer, limited to 10% of taxable income before certain deductions.

Question 18

When compared to a partnership, what additional requirement applies to keep a contribution of appreciated property to a corporation from causing recognized gain?

Accepted Answer

Section 351 applies for contributions to

Question 19

To which of the following entities does the AMT apply?
∙ Sole proprietorship.
∙ General partnership.
∙ Limited partnership.
∙ LLC.
∙ S corporation.
∙ C corporation.

Accepted Answer

The AMT applies directly to a sole propr

Question 20

Mercedes owns a 30% interest in Magenta Partnership basis of $52,000), which she sells to Calvin for $65,000.
Mercedes' recognized gain of $13,000 is classified as capital gain.

Accepted Answer

A) True 
 B)False

A benefit of an S corporation when compared with a C corporation is that it is subject to Federal income tax only in limited circumstances.

Walter wants to sell his wholly owned C corporation, Cream, Inc. The fair market value of his stock exceeds the corporation's adjusted basis for the assets. Should Walter sell his stock or have Cream sell its assets and make a liquidating distribution to him?

A limited partnership can indirectly avoid unlimited liability of the general partner if the general partner is a corporation.

Albert's sole proprietorship owns the following assets. Albert sells his sole proprietorship for $500,000. Calculate Albert's recognized gain or loss and classify it as capital or ordinary.

Match the following. -C corporation

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

Match the following statements. -Sale of the corporate assets by the C corporation.

In the sale of a partnership, how does the way the sale is structured i.e., sale of the partnership interests versus the sale of the partnership assets) produce different tax consequences for the sellers?

An S corporation election for Federal income tax purposes also is effective for all states' income tax purposes.

Each of the following can pass profits and losses through to the owners: general partnership, limited partnership, S corporation, and limited liability company.

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

Molly transfers land with an adjusted basis of $28,000 and a fair market value of $65,000 to the Sand Partnership for a 30% ownership interest. The land is encumbered by a mortgage of $18,000, which the partnership assumes. Her basis for her ownership interest is $10,000 $28,000 - $18,000).

Match the following statements. -Charitable contributions

When compared to a partnership, what additional requirement applies to keep a contribution of appreciated property to a corporation from causing recognized gain?

To which of the following entities does the AMT apply? ∙ Sole proprietorship. ∙ General partnership. ∙ Limited partnership. ∙ LLC. ∙ S corporation. ∙ C corporation.

Mercedes owns a 30% interest in Magenta Partnership basis of $52,000), which she sells to Calvin for $65,000. Mercedes' recognized gain of $13,000 is classified as capital gain.

Understanding and Working With the Federal Tax Law

The Deduction for Qualified Business Income for Pass-Through Entities

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operations, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S Corporations

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 13: Comparative Forms of Doing Business

A benefit of an S corporation when compared with a C corporation is that it is subject to Federal income tax only in limited circumstances.

Walter wants to sell his wholly owned C corporation, Cream, Inc. The fair market value of his stock exceeds the corporation's adjusted basis for the assets. Should Walter sell his stock or have Cream sell its assets and make a liquidating distribution to him?

A limited partnership can indirectly avoid unlimited liability of the general partner if the general partner is a corporation.

Albert's sole proprietorship owns the following assets. Albert sells his sole proprietorship for $500,000. Calculate Albert's recognized gain or loss and classify it as capital or ordinary.

Match the following. -C corporation

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

Match the following statements. -Sale of the corporate assets by the C corporation.

In the sale of a partnership, how does the way the sale is structured i.e., sale of the partnership interests versus the sale of the partnership assets) produce different tax consequences for the sellers?

An S corporation election for Federal income tax purposes also is effective for all states' income tax purposes.

Each of the following can pass profits and losses through to the owners: general partnership, limited partnership, S corporation, and limited liability company.

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

Molly transfers land with an adjusted basis of $28,000 and a fair market value of $65,000 to the Sand Partnership for a 30% ownership interest. The land is encumbered by a mortgage of $18,000, which the partnership assumes. Her basis for her ownership interest is $10,000 $28,000 - $18,000).

Match the following statements. -Charitable contributions

When compared to a partnership, what additional requirement applies to keep a contribution of appreciated property to a corporation from causing recognized gain?

To which of the following entities does the AMT apply? ∙ Sole proprietorship. ∙ General partnership. ∙ Limited partnership. ∙ LLC. ∙ S corporation. ∙ C corporation.

Mercedes owns a 30% interest in Magenta Partnership basis of $52,000), which she sells to Calvin for $65,000. Mercedes' recognized gain of $13,000 is classified as capital gain.

Understanding and Working With the Federal Tax Law

The Deduction for Qualified Business Income for Pass-Through Entities

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operations, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S Corporations

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters