Exam 15: Entities Overview

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

Unincorporated entities with only one individual owner are taxed as sole proprietorships.

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.

Which legal entity is correctly paired with the party that bears the ultimate responsibility for paying the legal entity's liabilities?

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

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

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?

If an individual forms a sole proprietorship, which nontax factor will be of greatest benefit to the sole proprietor?

In certain circumstances, C corporations can elect to be treated as flow-through entities.

Sole proprietorships are not treated as legal entities separate from their individual owners.