Question 1

Which of the following statements is correct?

Accepted Answer

A)  The AMT applies to both the individual taxpayer and the C corporation. 
B)  The individual AMT rates are 26% and 28%. 
C)  The C corporation AMT rate is 20%. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are correct. 
A)  The AMT applies to both the individual taxpayer and the C corporation. 
B)  The individual AMT rates are 26% and 28%. 
C)  The C corporation AMT rate is 20%. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are correct.

Question 2

Daniel, who is single, estimates that the profits of his business for the current tax year will be $100,000. Since the highest tax rate (34%) applicable to corporate taxable income of $100,000 is greater than the highest tax rate (28%) applicable to individual taxable income of $100,000, the Federal income tax liability will be less if Daniel conducts his business as a sole proprietorship rather than as a C corporation.

Accepted Answer

A) True 
 B)False

Question 3

Match the following statements:
a. Usually subject to single taxation even if the entity is incorporated.
b. Not making distributions to shareholders.
c. Rate for a corporate taxpayer is 20%.
d. Subject to double taxation.
e. Eligible for special allocations.
-Partnerships

Accepted Answer

The answer of Match the following statements:
a. Usually subject to...

Question 4

After a § 721 contribution by a partner to a partnership, the partner's basis for his or her ownership interest is the same as the basis of the assets contributed (no liabilities are involved).

Accepted Answer

A) True 
 B)False

Question 5

If a business entity has a majority of corporate characteristics, it is taxed as a corporation.

Accepted Answer

A) True 
 B)False

Question 6

In calculating the owner's initial basis for an ownership interest, which of the following business entity forms have a carryover basis and which have a stepped-up or stepped-down basis associated with its formation?
a. C corporation.
b. S corporation.
c. Partnership.

Accepted Answer

a., b., and c.
For the partnership, a pa

Question 7

Only C corporations are subject to the accumulated earnings tax (i.e., S corporations are not).

Accepted Answer

A) True 
 B)False

Question 8

Transferring funds to shareholders, that are deductible by the C corporation, can reduce or eliminate double taxation.

Accepted Answer

A) True 
 B)False

Question 9

Alice and Joe are going to form a business entity. Alice will contribute cash of $200,000 for a 40% ownership interest and Joe will contribute land worth $300,000 (basis of $180,000) for a 60% ownership interest. Which of the following statements is correct?

Accepted Answer

A)  If the entity is a C corporation, Alice has $0 recognized gain and a basis for her stock of $200,000, and Joe has a recognized gain of $120,000 and a basis for his stock of $300,000. 
B)  If the entity is an S corporation, Alice has $0 recognized gain and a basis for her stock of $200,000, and Joe has $0 recognized gain and a basis for his stock of $180,000. 
C)  If the entity is a general partnership, Alice has $0 recognized gain and a basis for her partnership interest of $152,000 ($380,000 × 40%), and Joe has $0 recognized gain and a basis for his partnership interest of
$228,000 ($380,000 × 60%). 
D)  Only a. and c. are correct. 
E)  a., b., and c. are correct. 
A)  If the entity is a C corporation, Alice has $0 recognized gain and a basis for her stock of $200,000, and Joe has a recognized gain of $120,000 and a basis for his stock of $300,000. 
B)  If the entity is an S corporation, Alice has $0 recognized gain and a basis for her stock of $200,000, and Joe has $0 recognized gain and a basis for his stock of $180,000. 
C)  If the entity is a general partnership, Alice has $0 recognized gain and a basis for her partnership interest of $152,000 ($380,000 × 40%), and Joe has $0 recognized gain and a basis for his partnership interest of
$228,000 ($380,000 × 60%). 
D)  Only a. and c. are correct. 
E)  a., b., and c. are correct.

Question 10

Match the following statements:
a. For the corporate taxpayer, are taxed using the regular tax rates.
b. Must be capitalized, but can be amortized over 180 months.
c. For the corporate taxpayer, the rate is 20%.
d. For the corporate taxpayer, cannot be deducted at all in the current tax year.
e. For the corporate taxpayer, limited to 10% of taxable income before certain deductions.
-Organization costs

Accepted Answer

The answer of Match the following statements:
a. For the corporate...

Question 11

Normally a C corporation shareholder would prefer to receive a return of capital distribution (e.g., stock redemption) rather than a dividend distribution. Provide an example of where the opposite is true.

Accepted Answer

Return of capital distributions result i

Question 12

The corporation has a greater potential for raising capital than does the partnership.

Accepted Answer

A) True 
 B)False

Question 13

Melinda's basis for her partnership interest is $250,000. If she receives a cash distribution of $290,000, her recognized gain is $40,000 and her basis for her partnership interest is reduced to $0. Melinda is still a partner after the distribution.

Accepted Answer

A) True 
 B)False

Question 14

The AMT tax rate for a C corporation is greater than the regular tax rate for C corporations.

Accepted Answer

A) True 
 B)False

Question 15

Each of the following can pass profits and losses through to the owners: general partnership, limited partnership, S corporation, and limited liability company.

Accepted Answer

A) True 
 B)False

Question 16

Match the following attributes with the different forms. A particular attribute may apply to more than one entity form.
a. Ability of all owners to have limited liability.
b. Ability to pass tax attributes through to the owners.
c. Right of all owners to participate in the management of the business.
d. Number of owners is limited.
e. Ability to have multiple owners.
-Limited partnership

Accepted Answer

The answer of Match the following attributes with the different...

Question 17

Match the following:
a. Contribution of appreciated property to the business entity by an owner is never subject to taxation.
b. Realized gains on the contribution of appreciated property to the entity are not recognized by the contributor when an 80% control requirement is satisfied.
c. Realized losses on the contribution of loss property to the entity are never recognized by the contributor.
d. Realized losses on the contribution of loss property to the entity are recognized by the contributor unless an 80% control requirement is satisfied.
e. Basis of ownership interest to the owner is dependent on whether gain or loss is recognized to the owner on the contribution of assets to the business entity.
-C corporation

Accepted Answer

The answer of Match the following:
a. Contribution of appreciated property...

Question 18

Alanna contributes property with an adjusted basis of $80,000 and a fair market value of $100,000 to a newly formed business entity. If the entity is a partnership and the transaction qualifies under § 721, the partnership's basis for the property and the partner's basis for the partnership interest are:  
E) None of the above.

Accepted Answer

The answer of Alanna contributes property with an adjusted basis...

Question 19

Which of the following statements is incorrect?

Accepted Answer

A)  The purchase of an unincorporated sole proprietorship is always treated as the purchase of its assets. 
B)  A taxpayer purchasing a corporation in which the assets are appreciated would prefer to purchase the stock of the corporation. 
C)  The purchase of a corporation is always treated as the purchase of the corporate stock. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are correct. 
A)  The purchase of an unincorporated sole proprietorship is always treated as the purchase of its assets. 
B)  A taxpayer purchasing a corporation in which the assets are appreciated would prefer to purchase the stock of the corporation. 
C)  The purchase of a corporation is always treated as the purchase of the corporate stock. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are correct.

Question 20

Which of the following is descriptive of the accumulated earnings tax?

Accepted Answer

A)  The tax rate may not be the same as the tax rate on qualified dividends. 
B)  For a closely held corporation that generates substantial earnings and never pays dividends, the tax cannot be avoided. 
C)  The tax applies to both C corporations and S corporations. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are correct. 
A)  The tax rate may not be the same as the tax rate on qualified dividends. 
B)  For a closely held corporation that generates substantial earnings and never pays dividends, the tax cannot be avoided. 
C)  The tax applies to both C corporations and S corporations. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are correct.

Which of the following statements is correct?

Match the following statements: a. Usually subject to single taxation even if the entity is incorporated. b. Not making distributions to shareholders. c. Rate for a corporate taxpayer is 20%. d. Subject to double taxation. e. Eligible for special allocations. -Partnerships

After a § 721 contribution by a partner to a partnership, the partner's basis for his or her ownership interest is the same as the basis of the assets contributed (no liabilities are involved).

If a business entity has a majority of corporate characteristics, it is taxed as a corporation.

In calculating the owner's initial basis for an ownership interest, which of the following business entity forms have a carryover basis and which have a stepped-up or stepped-down basis associated with its formation? a. C corporation. b. S corporation. c. Partnership.

Only C corporations are subject to the accumulated earnings tax (i.e., S corporations are not).

Transferring funds to shareholders, that are deductible by the C corporation, can reduce or eliminate double taxation.

Alice and Joe are going to form a business entity. Alice will contribute cash of $200,000 for a 40% ownership interest and Joe will contribute land worth $300,000 (basis of $180,000) for a 60% ownership interest. Which of the following statements is correct?

Normally a C corporation shareholder would prefer to receive a return of capital distribution (e.g., stock redemption) rather than a dividend distribution. Provide an example of where the opposite is true.

The corporation has a greater potential for raising capital than does the partnership.

Melinda's basis for her partnership interest is $250,000. If she receives a cash distribution of $290,000, her recognized gain is $40,000 and her basis for her partnership interest is reduced to $0. Melinda is still a partner after the distribution.

The AMT tax rate for a C corporation is greater than the regular tax rate for C corporations.

Each of the following can pass profits and losses through to the owners: general partnership, limited partnership, S corporation, and limited liability company.

Which of the following statements is incorrect?

Which of the following is descriptive of the accumulated earnings tax?

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S: Corporations

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 13: Comparative Forms of Doing Business

Which of the following statements is correct?

Match the following statements: a. Usually subject to single taxation even if the entity is incorporated. b. Not making distributions to shareholders. c. Rate for a corporate taxpayer is 20%. d. Subject to double taxation. e. Eligible for special allocations. -Partnerships

After a § 721 contribution by a partner to a partnership, the partner's basis for his or her ownership interest is the same as the basis of the assets contributed (no liabilities are involved).

If a business entity has a majority of corporate characteristics, it is taxed as a corporation.

In calculating the owner's initial basis for an ownership interest, which of the following business entity forms have a carryover basis and which have a stepped-up or stepped-down basis associated with its formation? a. C corporation. b. S corporation. c. Partnership.

Only C corporations are subject to the accumulated earnings tax (i.e., S corporations are not).

Transferring funds to shareholders, that are deductible by the C corporation, can reduce or eliminate double taxation.

Alice and Joe are going to form a business entity. Alice will contribute cash of $200,000 for a 40% ownership interest and Joe will contribute land worth $300,000 (basis of $180,000) for a 60% ownership interest. Which of the following statements is correct?

Normally a C corporation shareholder would prefer to receive a return of capital distribution (e.g., stock redemption) rather than a dividend distribution. Provide an example of where the opposite is true.

The corporation has a greater potential for raising capital than does the partnership.

Melinda's basis for her partnership interest is $250,000. If she receives a cash distribution of $290,000, her recognized gain is $40,000 and her basis for her partnership interest is reduced to $0. Melinda is still a partner after the distribution.

The AMT tax rate for a C corporation is greater than the regular tax rate for C corporations.

Each of the following can pass profits and losses through to the owners: general partnership, limited partnership, S corporation, and limited liability company.

Which of the following statements is incorrect?

Which of the following is descriptive of the accumulated earnings tax?

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S: Corporations

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters