Question 1

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

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 2

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 3

Of the corporate types of entities, all are subject to double taxation on current earnings.

Accepted Answer

A) True 
 B)False

Question 4

If a C corporation has earnings and profits at least equal to the amount of a distribution, the tax consequences to the shareholders are the same regardless of whether the distribution is classified as a dividend or as a stock redemption.

Accepted Answer

A) True 
 B)False

Question 5

If lease rental payments to a noncorporate shareholder-lessor are classified as unreasonable, the taxable income of a
C corporation increases and the gross income of the shareholder increases.

Accepted Answer

A) True 
 B)False

Question 6

Match the following statements.
-Sale of the individual assets of an unincorporated sole proprietorship by the owner.

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 7

An S corporation is not subject to the AMT, but its shareholders are because the S corporation's AMT adjustments and preferences are passed through to them.

Accepted Answer

A) True 
 B)False

Question 8

Match the following statements.
-Net capital gain

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 9

Corey is going to purchase the assets of Kathlyn's sole proprietorship. The assets of Kathlyn's sole proprietorship have appreciated in value. From Corey's perspective, does it matter whether the purchase is structured as the purchase of 1) the individual assets or 2) the sole proprietorship?

Accepted Answer

No. Regardless of the legal form of the

Question 10

Match the following statements.
-Regular tax rate

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 11

Wally contributes land adjusted basis of $30,000; fair market value of $100,000) to an S corporation in a transaction that qualifies under § 351. The corporation subsequently sells the land for $120,000, recognizing a gain of $90,000 $120,000 - $30,000). If Wally owns 30% of the stock, $76,000 [$70,000 + 30%$20,000)] of the $90,000 recognized gain is allocated to Wally.

Accepted Answer

A) True 
 B)False

Question 12

All of the shareholders of an S corporation have limited liability with respect to their ownership interests in the corporation whereas only limited partners in a limited partnership have such limited liability.

Accepted Answer

A) True 
 B)False

Question 13

The passive activity loss rules apply to S corporations but not to C corporations.

Accepted Answer

A) True 
 B)False

Question 14

The at-risk provisions and the passive activity loss provisions decrease the tax attractiveness of investments in real estate for partnerships and for limited liability companies.

Accepted Answer

A) True 
 B)False

Question 15

Kirby, the sole shareholder of Falcon, Inc., leases a building to the corporation. The taxable income of the corporation for the tax year before deducting the lease payments is projected to be $500,000.
a. What are the tax consequences to Kirby and to Falcon if Kirby leases a building to the corporation for $400,000?
b. Is there a potential pitfall? How would it change the tax consequences to Kirby and to
Falcon?

Accepted Answer

a. Kirby would include the $400,000 of l

Question 16

Match the following statements.
-C corporations

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 21%. 
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 21%. 
D) Subject to double taxation. 
E) Eligible for special allocations.

Question 17

Some fringe benefits always provide a double benefit-a deduction for the employer and an exclusion for the employee.

Accepted Answer

A) True 
 B)False

Question 18

Jiang contributes land with an adjusted basis of $85,000 and a fair market value of $100,000 to a business entity in which she is an 80% owner on the first day of the tax year. Discuss the tax consequences to Jiang if the business entity sells the land six months later for $120,000 if:

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

Accepted Answer

80%)].
b. None of the $35,000 gain is al

Question 19

Sam and Trang are going to establish a business. Sam will contribute cash of $100,000 for a 50% interest, and Trang will contribute land and a building worth $135,000 adjusted basis of $65,000) for a 50% interest. The land and building are encumbered by a $35,000 mortgage, which the entity assumes. Determine the tax consequences of the contribution to Sam, Trang, and the entity if the business is:
a. An S corporation.
b. A partnership.
c. A C corporation.

Accepted Answer

a. Under § 351, no gain or loss is recog

Question 20

Aubrey has been operating his business as a C corporation for the past five years. The corporation pays him a reasonable salary. The profits of the corporation, after paying Federal income tax, are distributed to him each year as a dividend. He is considering electing S status for his corporation in order to avoid double taxation. What factors should he consider assuming after-tax earnings will continue to be distributed to him?

Accepted Answer

Normally, one needs to consider the foll

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

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

Of the corporate types of entities, all are subject to double taxation on current earnings.

If a C corporation has earnings and profits at least equal to the amount of a distribution, the tax consequences to the shareholders are the same regardless of whether the distribution is classified as a dividend or as a stock redemption.

If lease rental payments to a noncorporate shareholder-lessor are classified as unreasonable, the taxable income of a C corporation increases and the gross income of the shareholder increases.

Match the following statements. -Sale of the individual assets of an unincorporated sole proprietorship by the owner.

An S corporation is not subject to the AMT, but its shareholders are because the S corporation's AMT adjustments and preferences are passed through to them.

Match the following statements. -Net capital gain

Corey is going to purchase the assets of Kathlyn's sole proprietorship. The assets of Kathlyn's sole proprietorship have appreciated in value. From Corey's perspective, does it matter whether the purchase is structured as the purchase of 1) the individual assets or 2) the sole proprietorship?

Match the following statements. -Regular tax rate

All of the shareholders of an S corporation have limited liability with respect to their ownership interests in the corporation whereas only limited partners in a limited partnership have such limited liability.

The passive activity loss rules apply to S corporations but not to C corporations.

The at-risk provisions and the passive activity loss provisions decrease the tax attractiveness of investments in real estate for partnerships and for limited liability companies.

Match the following statements. -C corporations

Some fringe benefits always provide a double benefit-a deduction for the employer and an exclusion for the employee.

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

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

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

Of the corporate types of entities, all are subject to double taxation on current earnings.

If a C corporation has earnings and profits at least equal to the amount of a distribution, the tax consequences to the shareholders are the same regardless of whether the distribution is classified as a dividend or as a stock redemption.

If lease rental payments to a noncorporate shareholder-lessor are classified as unreasonable, the taxable income of a C corporation increases and the gross income of the shareholder increases.

Match the following statements. -Sale of the individual assets of an unincorporated sole proprietorship by the owner.

An S corporation is not subject to the AMT, but its shareholders are because the S corporation's AMT adjustments and preferences are passed through to them.

Match the following statements. -Net capital gain

Corey is going to purchase the assets of Kathlyn's sole proprietorship. The assets of Kathlyn's sole proprietorship have appreciated in value. From Corey's perspective, does it matter whether the purchase is structured as the purchase of 1) the individual assets or 2) the sole proprietorship?

Match the following statements. -Regular tax rate

All of the shareholders of an S corporation have limited liability with respect to their ownership interests in the corporation whereas only limited partners in a limited partnership have such limited liability.

The passive activity loss rules apply to S corporations but not to C corporations.

The at-risk provisions and the passive activity loss provisions decrease the tax attractiveness of investments in real estate for partnerships and for limited liability companies.

Match the following statements. -C corporations

Some fringe benefits always provide a double benefit-a deduction for the employer and an exclusion for the employee.

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