Question 1

C corporations are not subject to AMT but individuals are.

Accepted Answer

A) True 
 B)False

Question 2

Match the following statements.
-Regular tax rate

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 3

A corporation has a greater potential for raising capital than does a partnership.

Accepted Answer

A) True 
 B)False

Question 4

In the purchase of a partnership, how does the way the purchase is structured i.e., purchase of the partnership interests or purchase of the partnership assets) produce different tax consequences for the purchasers?

Accepted Answer

From the buyer's perspective, the form o

Question 5

Match the following statements.
-Sale of an ownership interest by a partner.

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 6

A shareholder's basis in the stock of an S corporation is increased by corporate profits and decreased by losses.

Accepted Answer

A) True 
 B)False

Question 7

The special allocation opportunities that are available to partnerships are available to S corporations only if affected shareholders elect to do so.

Accepted Answer

A) True 
 B)False

Question 8

Luis owns all the stock of Silver, Inc., a C corporation for which his adjusted basis is $225,000. Luis founded Silver
12 years ago. The assets and liabilities of Silver are recorded as follows. $\begin{array}{lcc}
\text { Assets } & \text { Basis } & \text { FMV } \
\text { Cash } & \$ 15,000 & \$ 15,000
\end{array}$   *Accumulated depreciation of $55,000 has been deducted.
Luis has agreed to sell the business to Marilyn and they have agreed on a purchase price of $350,000 less any outstanding liabilities. They are both in the 35% tax bracket. 
a. Advise Luis on whether the form of the sales transaction should be a stock sale or an asset sale.
b. Advise Marilyn on whether the form of the purchase transaction should be a stock purchases or an asset purchase.

Accepted Answer

a. Luis would prefer that the form of th

Question 9

Arnold purchases a building for $750,000 that is going to be used by his wholly owned corporation. Which of the following statements are correct?

Accepted Answer

A)  If Arnold contributes the building to the corporation, there will be no gross income in the current year and a carryover basis of $750,000. 
B)  If Arnold leases the building to the corporation, lease-rental payments of $30,000 per year to Arnold will result in a $30,000 deduction for the corporation. 
C)  If Arnold leases the building to the corporation, lease-rental payments of $30,000 per year to Arnold will result in $30,000 of gross income for Arnold. 
D)  Leasing the building to the corporation will contribute to the tax avoidance objective of minimizing double taxation. 
E)  All of these statements are correct. 
A)  If Arnold contributes the building to the corporation, there will be no gross income in the current year and a carryover basis of $750,000. 
B)  If Arnold leases the building to the corporation, lease-rental payments of $30,000 per year to Arnold will result in a $30,000 deduction for the corporation. 
C)  If Arnold leases the building to the corporation, lease-rental payments of $30,000 per year to Arnold will result in $30,000 of gross income for Arnold. 
D)  Leasing the building to the corporation will contribute to the tax avoidance objective of minimizing double taxation. 
E)  All of these statements are correct.

Question 10

The tax treatment of S corporation shareholders with respect to fringe benefits is not the same as the tax treatment for C corporation shareholders, but is the same as the fringe benefit treatment for partners.

Accepted Answer

A) True 
 B)False

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

Swallow, Inc., is going to make a distribution of $700,000 to shareholder Marjean who is in the 35% tax bracket.
a. Determine the tax liability to Marjean if the form of the distribution is a dividend.
b. Determine the tax liability to Marjean if the form of the distribution is a stock redemption.
Assume Marjean's adjusted basis for the stock redeemed is $200,000 and that she has owned the stock for five years.

Accepted Answer

a. If the distribution is a dividend, Ma

Question 13

Both Malcomb and Sandra shareholders) 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 these 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 these are true.

C corporations are not subject to AMT but individuals are.

Match the following statements. -Regular tax rate

A corporation has a greater potential for raising capital than does a partnership.

In the purchase of a partnership, how does the way the purchase is structured i.e., purchase of the partnership interests or purchase of the partnership assets) produce different tax consequences for the purchasers?

Match the following statements. -Sale of an ownership interest by a partner.

A shareholder's basis in the stock of an S corporation is increased by corporate profits and decreased by losses.

The special allocation opportunities that are available to partnerships are available to S corporations only if affected shareholders elect to do so.

Arnold purchases a building for $750,000 that is going to be used by his wholly owned corporation. Which of the following statements are correct?

The tax treatment of S corporation shareholders with respect to fringe benefits is not the same as the tax treatment for C corporation shareholders, but is the same as the fringe benefit treatment for partners.

Match the following. -Limited partnership

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

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

C corporations are not subject to AMT but individuals are.

Match the following statements. -Regular tax rate

A corporation has a greater potential for raising capital than does a partnership.

In the purchase of a partnership, how does the way the purchase is structured i.e., purchase of the partnership interests or purchase of the partnership assets) produce different tax consequences for the purchasers?

Match the following statements. -Sale of an ownership interest by a partner.

A shareholder's basis in the stock of an S corporation is increased by corporate profits and decreased by losses.

The special allocation opportunities that are available to partnerships are available to S corporations only if affected shareholders elect to do so.

Arnold purchases a building for $750,000 that is going to be used by his wholly owned corporation. Which of the following statements are correct?

The tax treatment of S corporation shareholders with respect to fringe benefits is not the same as the tax treatment for C corporation shareholders, but is the same as the fringe benefit treatment for partners.

Match the following. -Limited partnership

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

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