Question 1

With respect to special allocations, is the S corporation treated more like a partnership or a C corporation?

Accepted Answer

The answer of With respect to special allocations, is the...

Question 2

The AMT statutory rate for S corporation shareholders on the AMT base is 20%.

Accepted Answer

A) True 
 B)False

Question 3

Match the following attributes with the different forms. A particular attribute may apply to more than one entity form.
-Limited partnership

Accepted Answer

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.

Question 4

Meg has an adjusted basis of $150,000 for her 40% ownership interest. During the year, the entity earns a profit of
$100,000 and liabilities increased by $70,000. Determine Meg's adjusted basis for her ownership interest.
a. If the entity is a partnership.
b. If the entity is a C corporation.
c. If the entity is an S corporation.

Accepted Answer

The answer of Meg has an adjusted basis of $150,000...

Question 5

How can double taxation be avoided or reduced by owning assets outside a C corporation?

Accepted Answer

The answer of How can double taxation be avoided or...

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Martin contributes property with an adjusted basis of $100,000 and a fair market value of $140,000 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:

Accepted Answer

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

Question 8

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

The answer of In calculating the owner's initial basis for...

Question 9

A limited liability company LLC) is a hybrid business form that combines the corporate characteristic of limited liability for the owners with the tax characteristics of a partnership.

Accepted Answer

A) True 
 B)False

Question 10

An individual who owes the NIIT cannot also be subject to the additional Medicare tax.

Accepted Answer

A) True 
 B)False

Question 11

Anne contributes property to the TCA Partnership, which was formed eight 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.
a. Anne has no recognized gain under § 721 and a carryover basis for
her partnership interest of $90,000. The partnership has a
a. Determine the tax consequences to Anne and to the partnership on the contribution of the property to the partnership.
b. Determine the tax consequences to Anne and the other partners on the sale of the property.
b. differ if the entity were an S corporation?
c. Would the tax consequences in

Accepted Answer

The answer of Anne contributes property to the TCA Partnership,...

Question 12

Match the following.
-S corporation

Accepted Answer

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.

Question 13

For which type of entity is an owner least likely to have an "wherewithal to pay" problem as to Federal income taxes? Explain. Describe any wherewithal to pay issue for sole proprietorships, partnerships, S corporations and C corporations.

Accepted Answer

The answer of For which type of entity is an...

Question 14

Tuan and Ella are going to establish a business. 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.

Question 15

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 an):
a. C corporation?
b. S corporation?
c. Partnership?

Accepted Answer

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

Question 16

Match the following statements.
-Partnerships

Accepted Answer

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 21%. 
D) Subject to double taxation. 
E) Eligible for special allocations.

Question 17

Abby is a limited partner in a limited partnership. Her basis in the partnership interest is $80,000 with an at-risk basis of $75,000. Abby's share of the partnership loss for the tax year is $90,000. She reports other income of $275,000 from her job as a controller. How much of the $90,000 can Abby offset against her other income of $275,000? What happens to any balance that cannot be deducted in the current tax year?

Accepted Answer

The answer of Abby is a limited partner in a...

Question 18

Daniel, who is single, estimates that the profits of his business for the current tax year will be $200,000; he has no other sources of gross income. Since the 21% corporate rate is less than Daniel's marginal rate of 32%, he would save taxes operating the business as a C corporation.

Accepted Answer

A) True 
 B)False

Question 19

Khalid contributes land fair market value of $700,000; adjusted basis of $200,000) and Dan contributes $700,000 cash to form Teal Partnership. Both Khalid and Dan own a 50% interest. One year later, Teal sells the land for $800,000. How much gain is recognized by each partner?

Accepted Answer

A)  $600,000 to Khalid, $0 to Dan. 
B)  $550,000 to Khalid, $50,000 to Dan. 
C)  $300,000 to Khalid, $300,000 to Dan. 
D)  $50,000 to Khalid, $50,000 to Dan.

Question 20

Match the following attributes with the different forms. A particular attribute may apply to more than one entity form.
-C corporation

Accepted Answer

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.

Exam 13: Comparative Forms of Doing Business

With respect to special allocations, is the S corporation treated more like a partnership or a C corporation?

The AMT statutory rate for S corporation shareholders on the AMT base is 20%.

Match the following attributes with the different forms. A particular attribute may apply to more than one entity form. -Limited partnership

How can double taxation be avoided or reduced by owning assets outside a C corporation?

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

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.

A limited liability company LLC) is a hybrid business form that combines the corporate characteristic of limited liability for the owners with the tax characteristics of a partnership.

An individual who owes the NIIT cannot also be subject to the additional Medicare tax.

Match the following. -S corporation

For which type of entity is an owner least likely to have an "wherewithal to pay" problem as to Federal income taxes? Explain. Describe any wherewithal to pay issue for sole proprietorships, partnerships, S corporations and C corporations.

Match the following statements. -Partnerships

Daniel, who is single, estimates that the profits of his business for the current tax year will be $200,000; he has no other sources of gross income. Since the 21% corporate rate is less than Daniel's marginal rate of 32%, he would save taxes operating the business as a C corporation.

Khalid contributes land fair market value of $700,000; adjusted basis of $200,000) and Dan contributes $700,000 cash to form Teal Partnership. Both Khalid and Dan own a 50% interest. One year later, Teal sells the land for $800,000. How much gain is recognized by each partner?

Match the following attributes with the different forms. A particular attribute may apply to more than one entity form. -C corporation