Question 1

The special allocation opportunities that are available to partnerships are not available to S corporations.

Accepted Answer

A) True 
 B)False

Question 2

Techniques are available that may permit a C corporation to avoid double taxation.

Accepted Answer

A) True 
 B)False

Question 3

Marcus 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 an S corporation and the transaction qualifies under § 351,the S corporation's basis for the property and the shareholder's basis for the stock are:
Asset Basis Stock Basis

Accepted Answer

A) $ 80,000 $100,000 
B) $100,000 $ 80,000 
C) $ 80,000 $ 80,000 
D) $100,000 $100,000 
E) None of the above. 
A) $ 80,000 $100,000 
B) $100,000 $ 80,000 
C) $ 80,000 $ 80,000 
D) $100,000 $100,000 
E) None of the above.

Question 4

Ralph wants to purchase either the stock or the assets of Red,Inc. ,a C corporation.

Accepted Answer

The answer of Ralph wants to purchase either the stock...

Question 5

A business entity has appreciated land (basis of $50,000 and fair market value of $75,000)which it is going to distribute to Craig,one of its owners.The entity has earned substantial profits during its 15 years of operations and has reinvested most of them in the business.What are the tax consequences of the distribution to the business entity and to Craig if the business entity is a(n):

Accepted Answer

The answer of A business entity has appreciated land (basis...

Question 6

Which of the following statements regarding the accumulated earnings tax is correct in 2010?

Accepted Answer

A) If Blue,Inc.'s accumulated taxable income for 2010 is $180,000,the calculated accumulated earnings tax liability would be $53,450 [($50,000 ´ 15%)+ ($25,000 ´ 25%)+ ($25,000 ´ 34%)+ ($80,000 ´ 39%)]. 
B) Blue,Inc. ,calculates accumulated taxable income for 2010 of $100,000.Therefore,it should increase the amount paid to the IRS for 2010 by $15,000 ($100,000 ´ 15%). 
C) The accumulated earnings tax applies to C corporations,but applies to S corporations at only the shareholder level. 
D) The tax rate for the accumulated earnings tax of 35% is the same as the highest tax bracket for the corporate taxpayer. 
E) None of the above. 
A) If Blue,Inc.'s accumulated taxable income for 2010 is $180,000,the calculated accumulated earnings tax liability would be $53,450 [($50,000 ´ 15%)+ ($25,000 ´ 25%)+ ($25,000 ´ 34%)+ ($80,000 ´ 39%)]. 
B) Blue,Inc. ,calculates accumulated taxable income for 2010 of $100,000.Therefore,it should increase the amount paid to the IRS for 2010 by $15,000 ($100,000 ´ 15%). 
C) The accumulated earnings tax applies to C corporations,but applies to S corporations at only the shareholder level. 
D) The tax rate for the accumulated earnings tax of 35% is the same as the highest tax bracket for the corporate taxpayer. 
E) None of the above.

Question 7

Eagle,Inc.recognizes that it may have an accumulated earnings tax problem.According to its calculation,Eagle anticipates it has accumulated taxable income,before reduction for dividends paid,of $600,000 in 2010.Assume that its shareholders are in the 35% marginal tax bracket.

Accepted Answer

The answer of Eagle,Inc.recognizes that it may have an accumulated...

Question 8

Section 1244 ordinary loss treatment is available to shareholders in a C corporation but not to those in an S corporation.

Accepted Answer

A) True 
 B)False

Question 9

Maurice purchases a bakery from Philip for $350,000.He spends an additional $100,000 (financed with a nonrecourse loan)updating the bakery equipment.During the first year of operations as a sole proprietorship,the bakery incurs a loss of $75,000.

Accepted Answer

The answer of Maurice purchases a bakery from Philip for...

Question 10

If an individual contributes an appreciated personal use asset to a C corporation in a transaction which qualifies for nonrecognition treatment under § 351,the corporation's basis in the asset is the same as was the shareholder's adjusted basis.

Accepted Answer

A) True 
 B)False

Question 11

Of the five types of entities,only the C corporation is subject to double taxation.

Accepted Answer

A) True 
 B)False

Question 12

Some fringe benefits always provide a deduction for the employer and are always excluded from the gross income of the employee.

Accepted Answer

A) True 
 B)False

Question 13

Included among the factors that influence the choice of the form of a business entity are the following:
   
Evaluate the validity of the statement.

Accepted Answer

All of these factors

Question 14

Lee owns all the stock of Vireo,Inc. ,a C corporation for which he has an adjusted basis of $150,000.The assets of Vireo,Inc. ,are as follows:
   
Lee sells his stock to Katrina for $200,000.

Accepted Answer

The answer of Lee owns all the stock of Vireo,Inc....

Question 15

Ashley contributes property to the TCA Partnership which was formed 7 years ago by Clark and Tara.Ashley's basis for the property is $70,000 and the fair market value is $150,000.Ashley receives a 25% interest for his contribution.Because the TCA Partnership is unsuccessful in having the property rezoned from agricultural to commercial,it sells the property 12 months later for $210,000.

Accepted Answer

The answer of Ashley contributes property to the TCA Partnership...

Question 16

Actual dividends paid to shareholders result in double taxation.Likewise,deemed dividends (e.g. ,free use of corporate assets by a shareholder)result in double taxation.

Accepted Answer

A) True 
 B)False

Question 17

Walter wants to sell his wholly-owned C corporation,Cream,Inc.The fair market value of his stock exceeds the corporation's adjusted basis for the assets.Should Walter sell his stock or have Cream sell its assets and make a liquidating distribution to him?

Accepted Answer

Selling the stock will result in single

Question 18

Tuna,Inc. ,a closely held corporation which is not a PSC,owns a 40% interest in Trout Partnership,which is classified as a passive activity.Trout's taxable loss for the current year is $200,000.During the year,Tuna receives a $60,000 cash distribution from Trout.Other relevant data for Tuna are as follows:
 
How much of Tuna's share of Trout's loss may it deduct in calculating its taxable income?

Accepted Answer

A) $0. 
B) $25,000. 
C) $60,000. 
D) $80,000. 
E) None of the above. 
A) $0. 
B) $25,000. 
C) $60,000. 
D) $80,000. 
E) None of the above.

Question 19

Steve and Karen are going to establish a business entity.They expect the business to be very successful in the long-run,but project losses of approximately $100,000 for each of the first five years.Due to potential environmental concerns,limited liability is a requisite for the owners.Which form of business entity should they select?

Accepted Answer

A) General partnership. 
B) Limited partnership. 
C) C corporation. 
D) S corporation. 
E) Any of the above should satisfy Steve and Karen. 
A) General partnership. 
B) Limited partnership. 
C) C corporation. 
D) S corporation. 
E) Any of the above should satisfy Steve and Karen.

Question 20

Which of the following statements is correct?

Accepted Answer

A) A C corporation has a greater opportunity to raise capital than does an S corporation. 
B) A limited partnership has a greater opportunity to raise capital than does a general partnership. 
C) A partnership has a greater opportunity to raise capital than does a sole proprietorship. 
D) Only a.and c.are correct. 
E) a. ,b. ,and c.are correct. 
A) A C corporation has a greater opportunity to raise capital than does an S corporation. 
B) A limited partnership has a greater opportunity to raise capital than does a general partnership. 
C) A partnership has a greater opportunity to raise capital than does a sole proprietorship. 
D) Only a.and c.are correct. 
E) a. ,b. ,and c.are correct.

The special allocation opportunities that are available to partnerships are not available to S corporations.

Techniques are available that may permit a C corporation to avoid double taxation.

Ralph wants to purchase either the stock or the assets of Red,Inc. ,a C corporation.

Which of the following statements regarding the accumulated earnings tax is correct in 2010?

Eagle,Inc.recognizes that it may have an accumulated earnings tax problem.According to its calculation,Eagle anticipates it has accumulated taxable income,before reduction for dividends paid,of $600,000 in 2010.Assume that its shareholders are in the 35% marginal tax bracket.

Section 1244 ordinary loss treatment is available to shareholders in a C corporation but not to those in an S corporation.

Maurice purchases a bakery from Philip for $350,000.He spends an additional $100,000 (financed with a nonrecourse loan)updating the bakery equipment.During the first year of operations as a sole proprietorship,the bakery incurs a loss of $75,000.

If an individual contributes an appreciated personal use asset to a C corporation in a transaction which qualifies for nonrecognition treatment under § 351,the corporation's basis in the asset is the same as was the shareholder's adjusted basis.

Of the five types of entities,only the C corporation is subject to double taxation.

Some fringe benefits always provide a deduction for the employer and are always excluded from the gross income of the employee.

Included among the factors that influence the choice of the form of a business entity are the following: Evaluate the validity of the statement.

Lee owns all the stock of Vireo,Inc. ,a C corporation for which he has an adjusted basis of $150,000.The assets of Vireo,Inc. ,are as follows: Lee sells his stock to Katrina for $200,000.

Actual dividends paid to shareholders result in double taxation.Likewise,deemed dividends (e.g. ,free use of corporate assets by a shareholder)result in double taxation.

Walter wants to sell his wholly-owned C corporation,Cream,Inc.The fair market value of his stock exceeds the corporation's adjusted basis for the assets.Should Walter sell his stock or have Cream sell its assets and make a liquidating distribution to him?

Which of the following statements is correct?

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

The special allocation opportunities that are available to partnerships are not available to S corporations.

Techniques are available that may permit a C corporation to avoid double taxation.

Ralph wants to purchase either the stock or the assets of Red,Inc. ,a C corporation.

Which of the following statements regarding the accumulated earnings tax is correct in 2010?

Eagle,Inc.recognizes that it may have an accumulated earnings tax problem.According to its calculation,Eagle anticipates it has accumulated taxable income,before reduction for dividends paid,of $600,000 in 2010.Assume that its shareholders are in the 35% marginal tax bracket.

Section 1244 ordinary loss treatment is available to shareholders in a C corporation but not to those in an S corporation.

Maurice purchases a bakery from Philip for $350,000.He spends an additional $100,000 (financed with a nonrecourse loan)updating the bakery equipment.During the first year of operations as a sole proprietorship,the bakery incurs a loss of $75,000.

If an individual contributes an appreciated personal use asset to a C corporation in a transaction which qualifies for nonrecognition treatment under § 351,the corporation's basis in the asset is the same as was the shareholder's adjusted basis.

Of the five types of entities,only the C corporation is subject to double taxation.

Some fringe benefits always provide a deduction for the employer and are always excluded from the gross income of the employee.

Included among the factors that influence the choice of the form of a business entity are the following: Evaluate the validity of the statement.

Lee owns all the stock of Vireo,Inc. ,a C corporation for which he has an adjusted basis of $150,000.The assets of Vireo,Inc. ,are as follows: Lee sells his stock to Katrina for $200,000.

Actual dividends paid to shareholders result in double taxation.Likewise,deemed dividends (e.g. ,free use of corporate assets by a shareholder)result in double taxation.

Walter wants to sell his wholly-owned C corporation,Cream,Inc.The fair market value of his stock exceeds the corporation's adjusted basis for the assets.Should Walter sell his stock or have Cream sell its assets and make a liquidating distribution to him?

Which of the following statements is correct?

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