Exam 14: Choice of Business Entity-Operations and Distributions

Which of the following items are included in the computation of the sole proprietorship's taxable income? I. Charitable contributions. II. Section 1231 gains and losses. III. Investment income and expenses.

Howard is a partner in the Smithton Partnership with a basis of $20,000. During the current year, the partnership is liquidated and the partnership distributes cash of $22,000 and property with a basis of $8,000 and a fair market value of $15,000 to each partner. What amount must Howard report as a gain from the liquidation?

Tippecanoe Corporation has the following income and expense items during the current year: Net income from operations $60,000 Dividend income from 10% owned corporation 180,000 What is Tippecanoe 's dividends-received deduction?

Ed's adjusted basis in his partnership interest at the beginning of the tax year is $35,000. The partnership has operating income of $20,000 for the current year. Ed is a 50% partner, and he receives a current distribution of $40,000 cash this year. What is are) the tax effect of these events? I. Ed recognizes $10,000 of ordinary income from the partnership for the year. II. Ed recognizes $40,000 of ordinary income due to the distribution. III. Ed's adjusted basis in his partnership interest at the close of the tax year is zero.

Regarding a partnership, which of the following statements is/are always correct? I. If a partnership is an active trade or business and it has a $65,000 loss from its business operations that is passed-through as an active loss to its partners, each active partner can deduct his full share of loss for the year to the extent they have basis that is at-risk. II. Salaries and bonuses paid to partner-employees other than guaranteed payments) are a deductible business expense.

Withdrawals of cash by a partner are taxable.

Bronco Corporation realizes $270,000 from sales during the current year. Bronco also receives $20,000 of dividends from a 2% owned corporation. Operating expenses totals $275,000. Bronco's taxable income is

Marian owns 40% of Addison Company, a partnership. Marian's adjusted basis in the partnership is $32,000 at the beginning of the year. During the current year, Marian receives a $10,000 cash distribution from the partnership. Addison Company reports a $100,000 operating loss for the current year. If Marian is not a material participant in Addison Company and has no other passive activities, how much of the partnership loss can she deduct on her income tax return?

Craig Corporation realizes $150,000 from sales during the current year. Craig also receives $20,000 of dividends from a 3% owned corporation. Operating expenses totals $155,000. Craig's dividends-received deduction is

When a corporation pays a dividend, it is nontaxable if it is in excess of earnings and profits.

Cornell and Joe are equal partners in Jones Company. For the current year, Jones reports the following items of income and expense: In addition to his Jones earnings, Joe has other net taxable income of $45,000. Included in the $45,000 is $10,000 in income from a passive activity. Joe's income is:

Rinaldo owns 20% of Mahoney Company, a partnership. Rinaldo's adjusted basis in the partnership is $32,000 at the beginning of the current year. During the current year, Rinaldo receives a $10,000 cash distribution from the partnership. Mahoney Company reports a $200,000 operating loss for the current year. Which of the following statements is/are correct? I. Rinaldo's maximum loss deduction is limited to $22,000. II. If Rinaldo is a material participant in Mahoney, he can deduct a $40,000 loss.

A family entity combines the tax-planning aspects of the progressive tax rate structure with the use of the owner's family to minimize the overall tax liability of the entire family.

Toliver Corporation incurs a long-term capital loss of $38,000 and a short-term capital gain of $33,000. Also, Toliver has operating income of $175,000. What is Toliver's taxable income?

During the current year, Hope Corporation has the following items of income and expense: Hope owns 10% of the domestic corporation that distributed the dividends to Hope. Determine Hope Corporation's net operating loss for the current year.

Henritta is the sole shareholder of Quaker Corporation. Quaker's income from operations for the current year is $600,000. Included in the $600,000 amount are dividends of $10,000 from the stock of a 4%-owned corporation. Also included in the $600,000 is a $4,000 long-term loss realized on the sale of a stock investment in an unaffiliated corporation. To compute taxable income for the current year, Henritta should deduct a capital loss of

hance Corporation has a $20,000 deficit in earnings and profits as of January 1, 2014. During 2014, the corporation has current earnings and profits of $40,000 and makes a $70,000 cash distribution to its shareholders. What part of the distribution is taxable as dividend income to Chance's shareholders?

rvin's adjusted basis in the Gamma Partnership is zero at the beginning of the current year. He has a $15,000 suspended loss from the previous year. During the current year, Gamma's operating income is $30,000. Arvin is a 40% partner, and he receives a distribution of $10,000 cash this year. If Arvin materially participates in Gamma's operations, how much of the suspended loss can he deduct?

Rona owns 3% of Theta Corporation and has a basis of $500 in her stock. During the year, Theta distributes a $40,000 taxable dividend and a $30,000 nontaxable dividend. As a result of the dividend, Rona has

Laurie and Lodi are dentists who have incorporated their practice. Laurie owns 60% of the stock of DENT-LL's Corporation and Lodi owns 40%. During the current year, the dentistry corporation has operating income of $125,000, interest income of $22,000 from investments, and losses from investments in limited partnerships of $24,000. The corporation pays $14,000 in dividends. What is DENT-LL's taxable income for the current year?