Exam 14: Choice of Business Entity -- Operations and Distributions

If a sole proprietorship has a net operating loss for the current period,the loss can only be used to offset other business income in the current year.Any current loss can be carried back three years and forward five years and used to offset business income in those years.

Harrison Corporation sells a building for $330,000 in the current year.Harrison purchased the building in 2008 for $250,000 and had taken $20,000 in depreciation on the building up to the date of its sale.How should Harrison report the gain on the sale of the building?

Match the term with the entity to which it applies. -Owner basis adjusted for liabilities

Global Corporation distributes property with a basis of $22,000 and a fair market value of $30,000 to Arturo in complete liquidation of the corporation.Arturo's basis in the stock is $14,000.What must Arturo and Global report as income upon the liquidation of Global? ​ Arturo Global

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. ​

A corporation may reduce trade or business income by a charitable contributions made by the corporation,but the deduction is limited to 10% of taxable income,as adjusted.

Posey Corporation distributes land with a fair market value of $20,000 and a basis of $12,000 to Brock,a shareholder.Posey's earnings and profits are $125,000.What must Brock report as income from the property distribution?

Sensor Corporation was formed and began operations in 2015.For that year,it had operating income of $50,000,long-term capital gains of $25,000 and short-term capital losses of $10,000.In 2016,the corporation had $5,000 of net long-term capital losses,and in 2017 the corporation had $20,000 of net long-term capital losses.How much capital loss is available to carry forward to 2018?

Abaco Corp.has gross income of $230,000 and taxable income of $50,000.The company did not include any special deductions in the calculation of taxable income.While reviewing the tax return,Abaco's accountant finds $20,000 of charitable contributions improperly classified as advertising and promotion expense.He sends the return back to the tax department for correction.What is Abaco's corrected taxable income?

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.

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. ​

Higlo Paints is a partnership that reports an operating income of $50,000 in the current year.Higlo also has a $20,000 Section 1231 gain from the sale of a building and $10,000 in nondeductible expenses.Bernice owns 20% of Higlo and withdraws $5,000 from the partnership during the current year.Bernice's basis will increase by:

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?

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

Micaela owns all the shares of the Madison Corporation that operates as an S corporation.Micaela's basis in the stock is $40,000.During the year she receives a cash distribution of $10,000 from Madison.What must Micaela and Madison report as income from the cash distribution? ​ Micaela Madison

Malcolm receives a liquidating distribution of land with a fair market value of $14,000 and a basis of $19,000 from Blithe Corporation,an S corporation.Malcolm's basis in the stock is $21,000.What must Malcolm and Blithe report as income (loss)from the property distribution? ​ Malcolm Blithe