Exam 11: Sole Proprietorships and Flow-Through Entities

Jonathan's basis in his S corporation stock is $4,000 at the end of the year before the corporation reports his $1,500 share of income and distributes $2,500 cash to him.What is his basis at the beginning of the following tax year?

Which of the following does not affect the basis of S corporation stock?

If a shareholder does not have sufficient stock basis to deduct his or her share of an S corporation's losses and deductible items, what are the tax consequences?

Jose, who is single, is allocated $510,000 of income and $788,000 of deductions from KYX General Partnership resulting in a $278,000 loss allocated to him for 2019.Jose's basis in the partnership is $300,000.How much of this loss can Jose deduct in 2019?

Which of the following may not be partners in a partnership?

Nathan's basis for his interest in the Nabors Partnership was $24,000.In complete liquidation of his interest, Nathan received cash of $4,000 and investment land having a fair market value of $40,000.Nabors Partnership's adjusted basis for this land was $15,000.Nathan's basis for this land is:

A sole proprietor:

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

Duet Co.is a calendar year S Corporation owned equally by Patricia and Scott.Duet Co.had taxable income of $40,000 for the current year.Patricia and Scott each received distributions from Duet Co.of $5,000.What is Patricia's taxable income from Duet Co.for the current year?

Which of the following cannot be taxed as a partnership?

The entity concept of a partnership views the partnership as separate from the partners and permits certain transactions between the partner and the partnership.

To qualify for the real property business exception for rental activities

Manuel purchased a 30% interest in MAC general partnership for $40,000 cash and materially participated in the partnership for the entire year.The partnership had $50,000 in liabilities when Manuel purchased his interest and the liabilities increased $10,000 during the year.If the partnership incurred a $300,000 loss this year, how much of this loss can Manuel deduct?

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

Sabrina is single and has taxable income of $200,725 of which $140,000 is attributable to her consulting sole proprietorship.She paid W-2 pages to her employees of $75,000.If the threshold amount for 2019 is $160,725, what is Sabrina's qualified business income deduction?

Lopez Corporation, an existing C corporation, wants to make an S election.If it has a June 30 year end, by what date must it make its election to be effective as of July 1, 2020?

Which of the following is not a potential S corporation tax?

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 2019?

Only 50 percent or more of the shareholders of an S corporation must consent to the S election.

Which of the following is not a requirement to make an S election?