Question 1

A sole proprietor is considered a self-employed individual.

Accepted Answer

A) True 
 B)False

Question 2

How does a partner establish that his current activity meets the material participation requirements?

Accepted Answer

There are four ways to be deemed to mate

Question 3

Kevin and Jennifer are 60% and 40% shareholders, respectively, in an S corporation. If the corporation reports $10,000 of nonseparately stated income and $2,000 of capital gain, how much is allocated to Jennifer?

Accepted Answer

A)  $4,000 income only 
B)  $4,000 income and $2,000 of capital gain 
C)  $4,000 income and $800 of capital gain 
D)  $6,000 income and $2,000 of capital gain 
A)  $4,000 income only 
B)  $4,000 income and $2,000 of capital gain 
C)  $4,000 income and $800 of capital gain 
D)  $6,000 income and $2,000 of capital gain

Question 4

Which of the following is not a separately stated item on a partnership's Schedule K?

Accepted Answer

A)  A $5,000 long-term capital loss 
B)  $20,000 of Section 1245 recapture 
C)  $3,000 charitable contribution 
D)  $5,000 bond interest income 
A)  A $5,000 long-term capital loss 
B)  $20,000 of Section 1245 recapture 
C)  $3,000 charitable contribution 
D)  $5,000 bond interest income

Question 5

Leo is a 50% shareholder in Small Corporation, an S Corporation from its incorporation. Leo receives a property distribution when his basis in his Small stock is $45,000. The property distributed has a fair market value of $45,000 and a basis to Small Corporation of $25,000. What is the gain recognized by Small Corporation as a result of the distribution and what is Leo's basis for the property he received?

Accepted Answer

A)  0 gain and $25,000 basis 
B)  0 gain and $45,000 basis 
C)  $20,000 gain and $25,000 basis 
D)  $20,000 gain and $45,000 basis 
A)  0 gain and $25,000 basis 
B)  0 gain and $45,000 basis 
C)  $20,000 gain and $25,000 basis 
D)  $20,000 gain and $45,000 basis

Question 6

Walter owns and manages his 50 percent interest in a rental apartment complex. His AGI for the current year is $110,000 excluding his portion of the $70,000 loss from the apartment complex. What is his loss carryover?

Accepted Answer

A)  0 
B)  $15,000 
C)  $25,000 
D)  $35,000 
A)  0 
B)  $15,000 
C)  $25,000 
D)  $35,000

Question 7

To qualify for the real property business exception for rental activities

Accepted Answer

A)  the taxpayer must materially participate for at least 500 hours. 
B)  the taxpayer must materially participate for at least 750 hours. 
C)  the taxpayer and spouse must materially participate for at least 1000 hours. 
D)  half the taxpayer's time must be spent in the activity and must equal at least 500 hours in the activity. 
A)  the taxpayer must materially participate for at least 500 hours. 
B)  the taxpayer must materially participate for at least 750 hours. 
C)  the taxpayer and spouse must materially participate for at least 1000 hours. 
D)  half the taxpayer's time must be spent in the activity and must equal at least 500 hours in the activity.

Question 8

Simpco, an S corporation, has gross operating revenue of $450,000, cost of sales of $150,000, salaries and FICA taxes for employees of $40,000, a $25,000 Section 179 expense deduction, $10,000 of other depreciation, interest income of $2,000, a $4,000 capital loss, and a $500 charitable contribution deduction. What are the corporation's net income and its separately stated items?

Accepted Answer

$450,000 - $150,000 - $40,000 - $10,000

Question 9

Once established at entry, a partner's basis account does not change.

Accepted Answer

A) True 
 B)False

Question 10

The basis limitation rules are applied before the at-risk and passive loss limitation rules.

Accepted Answer

A) True 
 B)False

Question 11

What taxes may be assessed an S corporation?

Accepted Answer

If a regular corporation makes an S elec

Question 12

At the beginning of the year, Jill's basis in her 40 percent limited partnership interest was $10,000. During the year, the partnership reported a loss of $90,000 and the partnership obtained a $40,000 recourse loan on some machinery. How much loss may Jill deduct if she has $40,000 of passive income?

Accepted Answer

A)  $10,000 
B)  $16,000 
C)  $26,000 
D)  $36,000 
A)  $10,000 
B)  $16,000 
C)  $26,000 
D)  $36,000

Question 13

Corbin has a $15,000 basis in his 50 percent ownership in an S corporation and loaned the corporation $5,000 last year. The corporation has $30,000 of other debt. This year the corporation reported a $100,000 loss. How much of this loss may Corbin deduct this year?

Accepted Answer

A)  $15,000 
B)  $20,000 
C)  $35,000 
D)  $50,000 
A)  $15,000 
B)  $20,000 
C)  $35,000 
D)  $50,000

Question 14

Kylie is single and has taxable income of $320,000 of which $130,000 is attributable to her consulting sole proprietorship. She paid W-2 wages to her employees of $75,000. If the threshold amount for 2018 is $157,500, what is Kylie's qualified business income deduction?

Accepted Answer

A)  $0 
B)  $11,000 
C)  $26,000 
D)  $32,500 
A)  $0 
B)  $11,000 
C)  $26,000 
D)  $32,500

Question 15

Sarah is a 25% partner in a partnership that produces $750,000 ordinary income from manufacturing a product, her share of partnership income is $187,500. The partnership paid $150,000 of W-2 wages. Sarah is single and has taxable income of $500,000. What is Sarah's qualified business income deduction for 2018?

Accepted Answer

A)  $7,500 
B)  $18,750 
C)  $30,000 
D)  $45,000 
A)  $7,500 
B)  $18,750 
C)  $30,000 
D)  $45,000

Question 16

A limited liability company that has only one member must be taxed as a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 17

A sole proprietorship must use the cash method of accounting.

Accepted Answer

A) True 
 B)False

Question 18

When does a partner recognize gain on a distribution?

Accepted Answer

A)  In a liquidating distribution when the fair market value of the property received exceeds partnership interest basis. 
B)  In a nonliquidating distribution and the property received exceeds the fair market value of the partnership interest. 
C)  In a nonliquidating distribution and the cash received exceeds the basis of the partnership interest. 
D)  Gain is not recognized until the property received for the partnership interest is sold. 
A)  In a liquidating distribution when the fair market value of the property received exceeds partnership interest basis. 
B)  In a nonliquidating distribution and the property received exceeds the fair market value of the partnership interest. 
C)  In a nonliquidating distribution and the cash received exceeds the basis of the partnership interest. 
D)  Gain is not recognized until the property received for the partnership interest is sold.

Question 19

Briefly explain the four loss limitation rules applicable to partners.

Accepted Answer

A partner cannot deduct a loss unless th

Question 20

Juan's interest in the Gonzalez Partnership is liquidated when his basis in the interest is $30,000. He receives a liquidating distribution of $20,000 cash and inventory with a basis of $8,000 and a fair market value of $30,000. Juan will recognize:

Accepted Answer

A)  No gain or loss 
B)  $2,000 loss 
C)  $10,000 loss 
D)  $20,000 gain 
A)  No gain or loss 
B)  $2,000 loss 
C)  $10,000 loss 
D)  $20,000 gain

A sole proprietor is considered a self-employed individual.

How does a partner establish that his current activity meets the material participation requirements?

Kevin and Jennifer are 60% and 40% shareholders, respectively, in an S corporation. If the corporation reports $10,000 of nonseparately stated income and $2,000 of capital gain, how much is allocated to Jennifer?

Which of the following is not a separately stated item on a partnership's Schedule K?

Walter owns and manages his 50 percent interest in a rental apartment complex. His AGI for the current year is $110,000 excluding his portion of the $70,000 loss from the apartment complex. What is his loss carryover?

To qualify for the real property business exception for rental activities

Once established at entry, a partner's basis account does not change.

The basis limitation rules are applied before the at-risk and passive loss limitation rules.

What taxes may be assessed an S corporation?

Corbin has a $15,000 basis in his 50 percent ownership in an S corporation and loaned the corporation $5,000 last year. The corporation has $30,000 of other debt. This year the corporation reported a $100,000 loss. How much of this loss may Corbin deduct this year?

Kylie is single and has taxable income of $320,000 of which $130,000 is attributable to her consulting sole proprietorship. She paid W-2 wages to her employees of $75,000. If the threshold amount for 2018 is $157,500, what is Kylie's qualified business income deduction?

A limited liability company that has only one member must be taxed as a sole proprietorship.

A sole proprietorship must use the cash method of accounting.

When does a partner recognize gain on a distribution?

Briefly explain the four loss limitation rules applicable to partners.

Juan's interest in the Gonzalez Partnership is liquidated when his basis in the interest is $30,000. He receives a liquidating distribution of $20,000 cash and inventory with a basis of $8,000 and a fair market value of $30,000. Juan will recognize:

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Estates, Gifts, and Trusts

Filters

Exam 11: Sole Proprietorships and Flow-Through Entities

A sole proprietor is considered a self-employed individual.

How does a partner establish that his current activity meets the material participation requirements?

Kevin and Jennifer are 60% and 40% shareholders, respectively, in an S corporation. If the corporation reports $10,000 of nonseparately stated income and $2,000 of capital gain, how much is allocated to Jennifer?

Which of the following is not a separately stated item on a partnership's Schedule K?

Walter owns and manages his 50 percent interest in a rental apartment complex. His AGI for the current year is $110,000 excluding his portion of the $70,000 loss from the apartment complex. What is his loss carryover?

To qualify for the real property business exception for rental activities

Once established at entry, a partner's basis account does not change.

The basis limitation rules are applied before the at-risk and passive loss limitation rules.

What taxes may be assessed an S corporation?

Corbin has a $15,000 basis in his 50 percent ownership in an S corporation and loaned the corporation $5,000 last year. The corporation has $30,000 of other debt. This year the corporation reported a $100,000 loss. How much of this loss may Corbin deduct this year?

Kylie is single and has taxable income of $320,000 of which $130,000 is attributable to her consulting sole proprietorship. She paid W-2 wages to her employees of $75,000. If the threshold amount for 2018 is $157,500, what is Kylie's qualified business income deduction?

A limited liability company that has only one member must be taxed as a sole proprietorship.

A sole proprietorship must use the cash method of accounting.

When does a partner recognize gain on a distribution?

Briefly explain the four loss limitation rules applicable to partners.

Juan's interest in the Gonzalez Partnership is liquidated when his basis in the interest is $30,000. He receives a liquidating distribution of $20,000 cash and inventory with a basis of $8,000 and a fair market value of $30,000. Juan will recognize:

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Estates, Gifts, and Trusts

Filters