Exam 4: Entities Overview

What is the maximum number of unrelated shareholders a C corporation can have,the maximum number of unrelated shareholders an S corporation can have,and the maximum number of partners a partnership may have respectively?

In the current year,DNS (a C corporation)had taxable income of $600,000 and distributed all of its after-tax earnings to Daniel,its sole shareholder.DNS's tax rate is 38 percent.Assuming Daniel's marginal tax rate on ordinary income is 28 percent and his dividend rate is 15 percent (he is not subject to the net investment income tax),what is the overall tax rate (combined corporate level and shareholder level)on DNS's $600,000 of taxable income?

From a tax perspective,which entity choice is preferred when a liquidating distribution occurs and the entity has assets that have declined in value?

Assume you plan to start a new enterprise; you know the probability of having losses for the first three years of operations is almost 90 percent,and you know you will report a substantial amount of income from other sources during those same three years.From a tax perspective,which of the following entity choices would be least favorable?

If you were seeking an entity with the most favorable tax treatment regarding (1)the number of owners allowed,(2)the flexibility to select your accounting period,and (3)the availability of preferential capital gains rates when selling your ownership interest,which entity should you decide to use?

S corporations have more restrictive ownership requirements than other entities.

On which tax form do LLCs with more than one owner generally report their income and losses?

Sole proprietors are subject to self-employment taxes on net income from their sole proprietorships.

C corporations and S corporations are separate taxpaying entities that pay tax on their own income.

Roberto and Reagan are both 25 percent owner/managers for Bright Light Inc.Roberto runs the retail store in Sacramento,CA,and Reagan runs the retail store in San Francisco,CA.Bright Light Inc.generated a $125,000 profit companywide made up of a $75,000 profit from the Sacramento store,a ($25,000)loss from the San Francisco store,and a combined $75,000 profit from the remaining stores.If Bright Light Inc.is an S corporation,how much income will be allocated to Roberto?

Emmy would like to organize PRK as either an LLC or as a corporation (taxed as a C corporation)generating a 15 percent annual before-tax rate of return on a $100,000 investment.Individual ordinary rates are 25 percent,corporate rates are 15 percent,and individual capital gains and dividends tax rates are 5 percent.PRK will distribute its earnings annually to either its members or shareholders. a.Ignoring self-employment taxes,how much would Emmy keep after taxes if PRK is organized as either an LLC or as a corporation (taxed as a C corporation)? b.Ignoring self-employment taxes,what are the overall tax rates (combined entity and owner level)if PRK is organized as either an LLC or a corporation (taxed as a C corporation)?

Jaron would like to organize TMZ as either an LLC or as a corporation (taxed as a C corporation)generating a 6 percent annual before-tax rate of return on a $200,000 investment.Individual and corporate tax rates are both 40 percent and individual capital gains and dividends tax rates are 10 percent.TMZ will distribute its earnings annually to either its members or shareholders. a.Ignoring self-employment taxes (and the additional Medicare Tax),how much would Jaron keep after taxes if TMZ is organized as either an LLC or a corporation (taxed as a C corporation)? b.Ignoring self-employment taxes (and the additional Medicare Tax),what are the overall tax rates (combined overall and entity level)if TMZ is organized as either an LLC or as a corporation (taxed as a C corporation)?

Which of the following is not an effective strategy for mitigating the double tax associated with C corporations?

What tax year-end must an unincorporated entity with only one owner adopt?

Becca would like to organize BMI as either an LLC or as a corporation (taxed as a C corporation)generating a 4 percent annual before-tax rate of return on a $450,000 investment.Individual ordinary rates are 28 percent,corporate rates are 15 percent,and individual capital gains and dividends tax rates are 15 percent.BMI will distribute its earnings annually to either its members or shareholders. a.Ignoring self-employment taxes,how much would Becca keep after taxes if BMI is organized as either a LLC or as a corporation (taxed as a C corporation)? b.Ignoring self-employment taxes,what are the overall (combined owner and entity level)tax rates if BMI is organized as either an LLC or as a corporation (taxed as a C corporation)?

What document must LLCs file with the state to organize their business?

Losses from C corporations are never available to offset a shareholder's personal income.

Robert is seeking additional capital to expand ABC Inc.In order to qualify ABC as an S corporation,which type of investor group could Robert obtain capital from?

Which of the following is not an effective strategy for mitigating double taxation in a C corporation?

When an employee/shareholder receives an income allocation from an S corporation,what taxes apply to the income allocation?