Question 1

A C corporation offers greater flexibility in terms of the types of owners and capital structure than an S corporation.

Accepted Answer

A) True 
 B)False

Question 2

A limited liability company (LLC)can elect under the check-the-box rules to be taxed as an S corporation.

Accepted Answer

A) True 
 B)False

Question 3

An effective way for all C corporations to avoid double taxation is not to make dividend distributions.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is correct?

Accepted Answer

A) The number of owners of an LLC is not limited. 
B) If the LLC has three or more corporate characteristics,it will be taxed as a C corporation. 
C) An LLC can elect to be taxed as a C corporation or as a partnership. 
D) Only a.and c. 
E) a. ,b. ,and c.are correct. 
A) The number of owners of an LLC is not limited. 
B) If the LLC has three or more corporate characteristics,it will be taxed as a C corporation. 
C) An LLC can elect to be taxed as a C corporation or as a partnership. 
D) Only a.and c. 
E) a. ,b. ,and c.are correct.

Question 5

Aaron purchases a building for $500,000 which is going to be used by his wholly-owned corporation.Which of the following statements are correct?

Accepted Answer

A) If Aaron contributes the building to the corporation,there will be no recognition under § 351 and a carryover basis of $500,000. 
B) If Aaron leases the building to the corporation,lease-rental payments of $30,000 per year to Aaron will result in a $30,000 deduction for the corporation. 
C) If Aaron leases the building to the corporation,lease-rental payments of $30,000 per year to Aaron will result in $30,000 of gross income for Aaron. 
D) Leasing the building to the corporation will contribute to the tax avoidance objective of minimizing double taxation. 
E) All of the above are correct. 
A) If Aaron contributes the building to the corporation,there will be no recognition under § 351 and a carryover basis of $500,000. 
B) If Aaron leases the building to the corporation,lease-rental payments of $30,000 per year to Aaron will result in a $30,000 deduction for the corporation. 
C) If Aaron leases the building to the corporation,lease-rental payments of $30,000 per year to Aaron will result in $30,000 of gross income for Aaron. 
D) Leasing the building to the corporation will contribute to the tax avoidance objective of minimizing double taxation. 
E) All of the above are correct.

Question 6

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

Accepted Answer

The statutory language of § 46

Question 7

The accumulated earnings tax rate in 2010 is the same as that for a C corporation that is classified as a personal service corporation.

Accepted Answer

A) True 
 B)False

Question 8

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.

Accepted Answer

A) $230,000 ordinary income. 
B) $230,000 capital gain. 
C) $115,000 ordinary income and $115,000 capital gain. 
D) $110,000 ordinary income and $120,000 capital gain. 
E) None of the above. 
A) $230,000 ordinary income. 
B) $230,000 capital gain. 
C) $115,000 ordinary income and $115,000 capital gain. 
D) $110,000 ordinary income and $120,000 capital gain. 
E) None of the above.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

From the perspective of the buyer of an unincorporated sole proprietorship whose assets have increased in value,the buyer is indifferent as to whether the transaction is the purchase of the business or a purchase of the individual assets.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) Sole proprietorship Form 1040-Schedule C 
B) Partnership Form 1065P 
C) C corporation Form 1120C 
D) LLC Form 1120S 
E) S corporation Form 1120 
A) Sole proprietorship Form 1040-Schedule C 
B) Partnership Form 1065P 
C) C corporation Form 1120C 
D) LLC Form 1120S 
E) S corporation Form 1120

Question 12

Kirby,the sole shareholder of Falcon,Inc. ,leases a building to the corporation.The taxable income of the corporation for 2010,before deducting the lease payments,is projected to be $500,000.

Accepted Answer

The answer of Kirby,the sole shareholder of Falcon,Inc. ,leases a...

Question 13

Which of the following entities has limited liability?

Accepted Answer

A) Sole proprietorship. 
B) Partnership. 
C) C corporation but not S corporation. 
D) S corporation but not C corporation. 
E) Both C and S corporations. 
A) Sole proprietorship. 
B) Partnership. 
C) C corporation but not S corporation. 
D) S corporation but not C corporation. 
E) Both C and S corporations.

Question 14

Candace,who is in the 33% tax bracket,is establishing a business which could have potential environmental liability problems.Therefore,she is trying to decide between the C corporation form and the S corporation form.She projects that the business will generate earnings of about $75,000 each year.Advise Candace on the tax consequences of each tax form.

Accepted Answer

If the form selected is an S corporation

Question 15

The corporate tax rate for a business entity is always less than the tax rate that would apply if the business entity were not incorporated.

Accepted Answer

A) True 
 B)False

Question 16

A major benefit of the S corporation election is the general avoidance of double taxation.

Accepted Answer

A) True 
 B)False

Question 17

Personal service corporations can offset passive activity losses against active income,but not against portfolio income.

Accepted Answer

A) True 
 B)False

Question 18

For a limited liability company with 100 owners,

Accepted Answer

A) An election can be made to be taxed as a C corporation. 
B) The entity is taxed as an S corporation. 
C) An election can be made to be taxed as a partnership. 
D) Only a.and c.are correct. 
E) a. ,b. ,and c.are correct. 
A) An election can be made to be taxed as a C corporation. 
B) The entity is taxed as an S corporation. 
C) An election can be made to be taxed as a partnership. 
D) Only a.and c.are correct. 
E) a. ,b. ,and c.are correct.

Question 19

A limited partner in a limited partnership has limited liability whereas a general partner in a limited partnership has unlimited liability unless the limited partners agree that the general partner will have limited liability.

Accepted Answer

A) True 
 B)False

Question 20

Julie is going to contribute the following assets to a business entity in exchange for an ownership interest.
   
What are the tax consequences of the contribution to Julie if the business entity is a(n):

Accepted Answer

The answer of Julie is going to contribute the following...

A C corporation offers greater flexibility in terms of the types of owners and capital structure than an S corporation.

A limited liability company (LLC)can elect under the check-the-box rules to be taxed as an S corporation.

An effective way for all C corporations to avoid double taxation is not to make dividend distributions.

Which of the following statements is correct?

Aaron purchases a building for $500,000 which is going to be used by his wholly-owned corporation.Which of the following statements are correct?

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

The accumulated earnings tax rate in 2010 is the same as that for a C corporation that is classified as a personal service corporation.

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

From the perspective of the buyer of an unincorporated sole proprietorship whose assets have increased in value,the buyer is indifferent as to whether the transaction is the purchase of the business or a purchase of the individual assets.

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

Kirby,the sole shareholder of Falcon,Inc. ,leases a building to the corporation.The taxable income of the corporation for 2010,before deducting the lease payments,is projected to be $500,000.

Which of the following entities has limited liability?

The corporate tax rate for a business entity is always less than the tax rate that would apply if the business entity were not incorporated.

A major benefit of the S corporation election is the general avoidance of double taxation.

Personal service corporations can offset passive activity losses against active income,but not against portfolio income.

For a limited liability company with 100 owners,

A limited partner in a limited partnership has limited liability whereas a general partner in a limited partnership has unlimited liability unless the limited partners agree that the general partner will have limited liability.

Julie is going to contribute the following assets to a business entity in exchange for an ownership interest. What are the tax consequences of the contribution to Julie if the business entity is a(n):

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

A C corporation offers greater flexibility in terms of the types of owners and capital structure than an S corporation.

A limited liability company (LLC)can elect under the check-the-box rules to be taxed as an S corporation.

An effective way for all C corporations to avoid double taxation is not to make dividend distributions.

Which of the following statements is correct?

Aaron purchases a building for $500,000 which is going to be used by his wholly-owned corporation.Which of the following statements are correct?

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

The accumulated earnings tax rate in 2010 is the same as that for a C corporation that is classified as a personal service corporation.

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

From the perspective of the buyer of an unincorporated sole proprietorship whose assets have increased in value,the buyer is indifferent as to whether the transaction is the purchase of the business or a purchase of the individual assets.

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

Kirby,the sole shareholder of Falcon,Inc. ,leases a building to the corporation.The taxable income of the corporation for 2010,before deducting the lease payments,is projected to be $500,000.

Which of the following entities has limited liability?

The corporate tax rate for a business entity is always less than the tax rate that would apply if the business entity were not incorporated.

A major benefit of the S corporation election is the general avoidance of double taxation.

Personal service corporations can offset passive activity losses against active income,but not against portfolio income.

For a limited liability company with 100 owners,

A limited partner in a limited partnership has limited liability whereas a general partner in a limited partnership has unlimited liability unless the limited partners agree that the general partner will have limited liability.

Julie is going to contribute the following assets to a business entity in exchange for an ownership interest. What are the tax consequences of the contribution to Julie if the business entity is a(n):

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