Exam 11: Entities Overview

In its first year of existence (2018)Aspen Corp.(a C corporation)reported a loss for tax purposes of $60,000.In 2019,it reports a $40,000 loss.For 2020,it reports taxable income from operations of $120,000.How much tax will Aspen Corp.pay for year 3?

Which legal entity provides the least flexible legal arrangement for owners?

The excess loss limitations apply to owners of all of the following entities except which of the following?

If a C corporation incurs a net operating loss in 2018,it may carry the loss back two years and forward 20 years to offset income in those years.

S corporation shareholders who work for the S corporation receive compensation in the form of a guaranteed payment.

LLC members have more flexibility than corporate shareholders to alter their legal arrangements with respect to one another,the entity,and with outsiders.

If a C corporation incurs a net operating loss in 2017,it may carry the loss back two years and forward 20 years to offset income in those years.However,it may offset only 80% of the taxable income before the NOL deduction in those years.

From a tax perspective,which entity choice is preferred when a liquidating distribution occurs and the entity has appreciated assets?

What kind of deduction is the deduction for qualified business income?

Shareholders of C corporations receiving property distributions must recognize dividend income equal to the fair market value of the distributed property if the distributing corporation has sufficient earnings and profits.

If individual taxpayers are the shareholders of PST Corporation and PST corporation is a shareholder of MNO Corporation,how many levels of tax is MNO's pre-tax income potentially exposed to?

Which of the following legal entities file documents with the state to be formally recognized by the state?

For tax purposes,only unincorporated entities can be considered to be disregarded entities.

Roberto and Reagan are both 25 percent owner/managers for Bright Light Enterprises.Roberto runs the retail store in Sacramento,CA,and Reagan runs the retail store in San Francisco,CA.Bright Light 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 is taxed as a partnership and decides that Roberto and Reagan will be allocated 70 percent of his own store's profit with the remaining profits allocated pro rata among all the owners,how much income will be allocated to Reagan?

In its first year of existence,BYC Corporation (a C corporation)reported a loss for tax purposes of ($40,000).How much tax will BYC pay in year 2 if it reports taxable income from operations of $35,000 in year 2 before any loss carryovers?

P corporation owns 60 percent of the stock of S corporation.If S corporation distributes a dividend to P corporation,what is tax rate on the dividend after the dividends received deduction (DRD)if P is entitled to a 65 percent DRD?

If a C corporation incurs a net operating loss in 2018 and carries the loss forward to 2019,the NOL carryover is not allowed to offset 100% of the corporation's taxable income (before the net operating loss deduction).

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

Corporations are legally formed by filing articles of organization with the state in which the corporation will be created.

Business income allocations to owners from an LLC that is taxed as a partnership are subject to self-employment tax if the owners are significantly involved in the entity's business activities.