Exam 13: Comparative Forms of Doing Business

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?

Free

(Essay)

4.9/5

(37)

Question 1

Correct Answer:

Verified

a. ,b. ,and c.
For the partnership,a partner's basis for his or her ownership interest is a carryover basis under § 722.For the corporation (i.e. ,both C and S),a shareholder's basis for his or her stock is a carryover basis under § 358 if the 80% control requirement under § 351 is satisfied.If the control requirement is not satisfied,then a shareholder's basis for his or her stock is a stepped-up or stepped-down basis (i.e. ,fair market value of the assets on the date of contribution).

Beige,Inc. ,has 3,000 shares of stock authorized and 1,000 shares outstanding.The shares are owned by Sam (700 shares)and Lois (300 shares).Sam's adjusted basis for his stock is $100,000 and Lois' adjusted basis for her stock is $90,000.Beige's earnings and profits are $500,000.Beige redeems 200 of Lois' shares for $150,000.Determine the amount of Lois' recognized gain (1)if she is Sam's mother and (2)if they are unrelated.

Free

(Multiple Choice)

4.8/5

(40)

Question 2

Correct Answer:

Verified

Austin is the sole shareholder of Purple,Inc.Purple's accumulated E & P at the beginning of the year is $700,000.Purple's taxable income after paying a salary and bonus to Austin of $100,000 is $500,000.Assume the salary and bonus payment are reasonable.Purple's maximum exposure in calculating accumulated taxable income for purposes of the accumulated earnings tax for the current tax year is:

Free

(Multiple Choice)

4.8/5

(32)

Question 3

Correct Answer:

Verified

A corporation may alternate between S corporation and C corporation status each year,depending on which results in more tax savings.

(True/False)

4.8/5

(42)

Question 4

Maria has a 70% ownership interest in a business entity.She is in the 28% tax bracket.The entity incurs $18,000 of meals and lodging expense for Maria,which she believes qualify for exclusion under § 119.Which of the following statements is correct?

(Multiple Choice)

4.9/5

(41)

Question 5

Do the § 465 at-risk rules apply to partnerships,LLCs,and S corporations?

(Essay)

4.8/5

(36)

Question 6

The ACE adjustment associated with the C corporation AMT can be either positive or negative.

(True/False)

4.7/5

(26)

Question 7

Anne contributes property to the TCA Partnership which was formed 8 years ago by Clark and Tara.Anne's basis for the property is $90,000 and the fair market value is $220,000.Anne receives a 25% interest for her contribution.Because the TCA Partnership is unsuccessful in having the property rezoned from agricultural to commercial,it sells the property 14 months later for $225,000.

(Essay)

4.8/5

(35)

Question 8

Obtaining a deduction on payments made by a C corporation to shareholders is a technique for reducing double taxation.

(True/False)

4.8/5

(46)

Question 9

Which of the following is correct regarding the form for filing the annual Federal income tax return? Business entity form Tax form

(Multiple Choice)

4.7/5

(43)

Question 10

Why does stock redemption treatment for an individual shareholder produce more favorable tax consequences than a dividend?

(Essay)

4.9/5

(24)

Question 11

If a C corporation has earnings and profits at least equal to the amount of a distribution,the tax consequences to the shareholders are the same,regardless of whether the distribution is classified as a dividend or as a stock redemption.

(True/False)

4.9/5

(29)

Question 12

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).

(True/False)

4.8/5

(35)

Question 13

C corporations and S corporations can generate an AMT adjustment known as Adjusted Current Earnings (ACE).

(True/False)

4.8/5

(32)

Question 14

An S corporation election for Federal income tax purposes also is effective for all states' income tax purposes.

(True/False)

5.0/5

(35)

Question 15

Depending on the election made under the check-the-box provisions,a limited liability company (LLC)with two or more owners might have to file a Form 1065 or a Form 1120.

(True/False)

4.7/5

(42)

Question 16

Robin Company has $100,000 of income before payment of $100,000 of reasonable salaries to its owners/employees (who are in the 33% bracket).Which form of business results in the least amount of combined tax being paid by the company and its owners?

(Multiple Choice)

4.9/5

(30)

Question 17

If an S corporation distributes appreciated property as a dividend,it must recognize gain as to the appreciation.

(True/False)

4.8/5

(28)

Question 18

The special allocation opportunities that are available to partnerships are available to S corporations only if affected shareholders elect to do so.

(True/False)

4.8/5

(40)

Question 19

Kristine owns all of the stock of a C corporation which owns the following assets: * Potential § 1245 recapture of $45,000. ** Straight-line depreciation was used. Her adjusted basis for her stock is $270,000.Calculate Kristine's recognized gain or loss and classify it as capital or ordinary if she sells her stock for $500,000.

(Multiple Choice)

4.9/5

(29)

Question 20

Showing 1 - 20 of 141

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 corporation may alternate between S corporation and C corporation status each year,depending on which results in more tax savings.

Maria has a 70% ownership interest in a business entity.She is in the 28% tax bracket.The entity incurs $18,000 of meals and lodging expense for Maria,which she believes qualify for exclusion under § 119.Which of the following statements is correct?

Do the § 465 at-risk rules apply to partnerships,LLCs,and S corporations?

The ACE adjustment associated with the C corporation AMT can be either positive or negative.

Obtaining a deduction on payments made by a C corporation to shareholders is a technique for reducing double taxation.

Which of the following is correct regarding the form for filing the annual Federal income tax return? Business entity form Tax form

Why does stock redemption treatment for an individual shareholder produce more favorable tax consequences than a dividend?

If a C corporation has earnings and profits at least equal to the amount of a distribution,the tax consequences to the shareholders are the same,regardless of whether the distribution is classified as a dividend or as a stock redemption.

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).

C corporations and S corporations can generate an AMT adjustment known as Adjusted Current Earnings (ACE).

An S corporation election for Federal income tax purposes also is effective for all states' income tax purposes.

Depending on the election made under the check-the-box provisions,a limited liability company (LLC)with two or more owners might have to file a Form 1065 or a Form 1120.

Robin Company has $100,000 of income before payment of $100,000 of reasonable salaries to its owners/employees (who are in the 33% bracket).Which form of business results in the least amount of combined tax being paid by the company and its owners?

If an S corporation distributes appreciated property as a dividend,it must recognize gain as to the appreciation.

The special allocation opportunities that are available to partnerships are available to S corporations only if affected shareholders elect to do so.

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