Question 1

Which of the following items would be separately stated instead of included in ordinary income when reported by a partnership?

Accepted Answer

A) Municipal bond interest income 
B) Capital loss 
C) Dividend income 
D) All of the above items would be separately stated 
A) Municipal bond interest income 
B) Capital loss 
C) Dividend income 
D) All of the above items would be separately stated

Question 2

Sue's 2019 net (take-home)pay was $23,205.Her only payroll deductions were for payroll taxes and federal income tax.Federal income tax withholdings totaled $4,500.What was the amount of her gross wages for the year?

Accepted Answer

A) $25,127 
B) $30,000 
C) $29,480 
D) None of the above 
A) $25,127 
B) $30,000 
C) $29,480 
D) None of the above

Question 3

Drake Partnership earned a net profit of $400,000.Four partners share profits and losses equally.No cash was distributed.The partners will report taxable income from the partnership on their personal income tax returns for the year.

Accepted Answer

A) True 
 B)False

Question 4

If a partner's share of partnership losses exceeds basis,the excess is not deductible in the current year and cannot be carried forward for deduction in the future.

Accepted Answer

A) True 
 B)False

Question 5

Funky Chicken is a calendar year S corporation with the following current year information:   On January 1 June Cross bought 60% of Funky Chicken for $45,000.She then loaned the company $20,000.How much of the operating loss may Cross deduct on her Form 1040? Assume the excess business loss limitation does not apply.

Accepted Answer

A) $57,000 
B) $80,000 
C) $65,000 
D) $75,000 
A) $57,000 
B) $80,000 
C) $65,000 
D) $75,000

Question 6

Bernard and Leon formed a partnership on January 1 with cash contributions of $600,000 and $200,000,respectively.The partners agree to share profits and losses in the ratio of their initial capital contributions.The partnership immediately borrowed $800,000.What is Bernard's tax basis in his partnership interest?

Accepted Answer

A) $1,200,000 
B) $600,000 
C) $800,000 
D) $1,400,000 
A) $1,200,000 
B) $600,000 
C) $800,000 
D) $1,400,000

Question 7

Ted is a 20 percent general partner in Bevo.
Bevo Partnership had the following financial activity for the year:
   a.Compute Ted's share of partnership ordinary income and separately stated items.
b.If Ted's adjusted basis in his Bevo interest was $30,000 at the beginning of the year,compute his adjusted basis at the end of the year.Assume that Bevo's debt did not change during the year.
c.How would your basis computation change if Bevo's debt at the end of the year as $50,000 less than its debt at the beginning of the year?

Accepted Answer

a.Ted's share of: partnership ordinary i

Question 8

Which of the following amounts are not subject to self-employment tax?

Accepted Answer

A) General partner's share of partnership income 
B) Limited partner's share of partnership income 
C) Sole proprietor's income from business activity 
D) Guaranteed payment to general partner 
A) General partner's share of partnership income 
B) Limited partner's share of partnership income 
C) Sole proprietor's income from business activity 
D) Guaranteed payment to general partner

Question 9

The shareholders of an S corporation must pay self-employment tax on their share of the corporation's ordinary income.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements about partnerships is false?

Accepted Answer

A) A partnership is a legal entity that may enter into valid contracts. 
B) Partnerships are unincorporated entities. 
C) Only individuals may be partners in a partnership. 
D) Partnerships are sometimes referred to as passthrough entities since they do not pay federal income tax. 
A) A partnership is a legal entity that may enter into valid contracts. 
B) Partnerships are unincorporated entities. 
C) Only individuals may be partners in a partnership. 
D) Partnerships are sometimes referred to as passthrough entities since they do not pay federal income tax.

Question 11

Perry is a partner in a calendar year partnership.His Schedule K-1 for the current tax year showed the following:   Perry's tax basis in his partnership interest at the beginning of the year was $15,400.How much of the ordinary loss may he deduct on his Form 1040? Assume the excess business loss limitation does not apply.

Accepted Answer

A) $11,700 
B) $14,000 
C) $10,200 
D) $13,300 
A) $11,700 
B) $14,000 
C) $10,200 
D) $13,300

Question 12

Jose is married filing a joint return.In 2019,he earned $160,000 of profit from his sole proprietorship,which operates a service business.The business paid no W-2 wages in 2019 and owns no tangible business property.
a.Compute Jose's allowable QBI deduction if his joint return reflects taxable income of $300,000 before the deduction.
b.Compute Jose's allowable QBI deduction if his joint return reflects taxable income of $340,000 before the deduction.

Accepted Answer

a.QBI deduction is $32,000 ($160,000 x 2

Question 13

Which of the following statements regarding a sole proprietorship is false?

Accepted Answer

A) A sole proprietorship is an unincorporated business operated by one individual. 
B) Taxable income from a sole proprietorship is reported on Schedule D of the proprietor's individual income tax return. 
C) Sole proprietors are entitled to deduct 50 percent of self-employment tax paid. 
D) None of the above statements are false. 
A) A sole proprietorship is an unincorporated business operated by one individual. 
B) Taxable income from a sole proprietorship is reported on Schedule D of the proprietor's individual income tax return. 
C) Sole proprietors are entitled to deduct 50 percent of self-employment tax paid. 
D) None of the above statements are false.

Question 14

XYZ,Inc.wishes to make an election to become an S corporation for federal tax purposes.Which of the following statements regarding the election is false?

Accepted Answer

A) All of the corporation's shareholders must consent to make an S election. 
B) If a shareholder in an S corporation sells his shares of stock to a nonresident alien,the election will terminate. 
C) If an S corporation loses its election,the shareholders cannot make a new election for five years without IRS consent. 
D) All of the shareholders must consent to voluntarily terminating an S election. 
A) All of the corporation's shareholders must consent to make an S election. 
B) If a shareholder in an S corporation sells his shares of stock to a nonresident alien,the election will terminate. 
C) If an S corporation loses its election,the shareholders cannot make a new election for five years without IRS consent. 
D) All of the shareholders must consent to voluntarily terminating an S election.

Question 15

Rebecca has a qualifying home office.The room is 600 square feet and the entire house is 3,000 square feet.Use the following information to determine her allowable home office deduction:

Accepted Answer

A) $3,300 home office deduction. 
B) $16,500 home office deduction. 
C) $3,500 home office deduction. 
D) $4,100 home office deduction. 
A) $3,300 home office deduction. 
B) $16,500 home office deduction. 
C) $3,500 home office deduction. 
D) $4,100 home office deduction.

Question 16

Which of the following statements regarding limited liability companies is true?

Accepted Answer

A) Just like an S corporation,an LLC member's share of ordinary income is not subject to self-employment taxes. 
B) Just like an S corporation,an LLC is restricted to 100 members. 
C) Because LLCs are a relatively new organizational form,many tax questions concerning their operation have yet to be resolved. 
D) Just like a limited partnership,only LLC members who are not actively involved in the entity's business activities have limited liability for the LLC's debts. 
A) Just like an S corporation,an LLC member's share of ordinary income is not subject to self-employment taxes. 
B) Just like an S corporation,an LLC is restricted to 100 members. 
C) Because LLCs are a relatively new organizational form,many tax questions concerning their operation have yet to be resolved. 
D) Just like a limited partnership,only LLC members who are not actively involved in the entity's business activities have limited liability for the LLC's debts.

Question 17

Partners receiving guaranteed payments are not required to pay self-employment tax on such payments.

Accepted Answer

A) True 
 B)False

Question 18

Armond earned $10,000 of profit from a sole proprietorship in 2019.If he also has $140,000 of salary income,how much self-employment tax will he owe?

Accepted Answer

A) $1,530 
B) $1,413 
C) $290 
D) $268 
A) $1,530 
B) $1,413 
C) $290 
D) $268

Question 19

Janice earned $175,000 of qualified business income this year from her sole proprietorship and has taxable income,before any QBI deduction,of $150,000.Janice is permitted a QBI deduction of

Accepted Answer

A) $35,000 
B) $30,000 
C) $25,000 
D) $0 
A) $35,000 
B) $30,000 
C) $25,000 
D) $0

Question 20

On January 1,Leon purchased a 10% stock interest in an S corporation for $30,000.He also loaned the S corporation $5,000 in exchange for a written promissory note.The S corporation generated a $330,000 operating loss for the year.Leon deducted his 10% share of the loss,reducing his tax basis in his stock to zero,and his tax basis in the note to $2,000.The following year,the S corporation repaid the note before Leon restored his basis in the note.What are the consequences of the loan repayment to Leon?

Accepted Answer

A) $3,000 capital gain 
B) $3,000 ordinary income 
C) $2,000 capital gain 
D) $2,000 ordinary income 
A) $3,000 capital gain 
B) $3,000 ordinary income 
C) $2,000 capital gain 
D) $2,000 ordinary income

Which of the following items would be separately stated instead of included in ordinary income when reported by a partnership?

Sue's 2019 net (take-home)pay was $23,205.Her only payroll deductions were for payroll taxes and federal income tax.Federal income tax withholdings totaled $4,500.What was the amount of her gross wages for the year?

Drake Partnership earned a net profit of $400,000.Four partners share profits and losses equally.No cash was distributed.The partners will report taxable income from the partnership on their personal income tax returns for the year.

If a partner's share of partnership losses exceeds basis,the excess is not deductible in the current year and cannot be carried forward for deduction in the future.

Which of the following amounts are not subject to self-employment tax?

The shareholders of an S corporation must pay self-employment tax on their share of the corporation's ordinary income.

Which of the following statements about partnerships is false?

Which of the following statements regarding a sole proprietorship is false?

XYZ,Inc.wishes to make an election to become an S corporation for federal tax purposes.Which of the following statements regarding the election is false?

Rebecca has a qualifying home office.The room is 600 square feet and the entire house is 3,000 square feet.Use the following information to determine her allowable home office deduction:

Which of the following statements regarding limited liability companies is true?

Partners receiving guaranteed payments are not required to pay self-employment tax on such payments.

Armond earned $10,000 of profit from a sole proprietorship in 2019.If he also has $140,000 of salary income,how much self-employment tax will he owe?

Janice earned $175,000 of qualified business income this year from her sole proprietorship and has taxable income,before any QBI deduction,of $150,000.Janice is permitted a QBI deduction of

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

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Exam 10: Sole Proprietorships, partnerships, llcs, and S Corporations

Which of the following items would be separately stated instead of included in ordinary income when reported by a partnership?

Sue's 2019 net (take-home)pay was $23,205.Her only payroll deductions were for payroll taxes and federal income tax.Federal income tax withholdings totaled $4,500.What was the amount of her gross wages for the year?

Drake Partnership earned a net profit of $400,000.Four partners share profits and losses equally.No cash was distributed.The partners will report taxable income from the partnership on their personal income tax returns for the year.

If a partner's share of partnership losses exceeds basis,the excess is not deductible in the current year and cannot be carried forward for deduction in the future.

Which of the following amounts are not subject to self-employment tax?

The shareholders of an S corporation must pay self-employment tax on their share of the corporation's ordinary income.

Which of the following statements about partnerships is false?

Which of the following statements regarding a sole proprietorship is false?

XYZ,Inc.wishes to make an election to become an S corporation for federal tax purposes.Which of the following statements regarding the election is false?

Rebecca has a qualifying home office.The room is 600 square feet and the entire house is 3,000 square feet.Use the following information to determine her allowable home office deduction:

Which of the following statements regarding limited liability companies is true?

Partners receiving guaranteed payments are not required to pay self-employment tax on such payments.

Armond earned $10,000 of profit from a sole proprietorship in 2019.If he also has $140,000 of salary income,how much self-employment tax will he owe?

Janice earned $175,000 of qualified business income this year from her sole proprietorship and has taxable income,before any QBI deduction,of $150,000.Janice is permitted a QBI deduction of

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters