Question 1

Partners may deduct on their individual income tax returns an amount equal to 100% of self-employment tax paid.

Accepted Answer

A) True 
 B)False

Question 2

Mutt and Jeff are general partners in M&J Partnership and share profits and losses equally.Partnership operations for the current tax year were:   Mutt's tax basis in his partnership interest at the beginning of the current year was $12,000.What is his basis at the beginning of next year?

Accepted Answer

A) $25,000 
B) $37,000 
C) $13,000 
D) $27,000 
A) $25,000 
B) $37,000 
C) $13,000 
D) $27,000

Question 3

The FICA taxes authorized by the Federal Insurance Contribution Act is imposed upon all of the employee's wages for the year.

Accepted Answer

A) True 
 B)False

Question 4

A partnership deducts guaranteed payments paid to its partners in computing ordinary income,and partners report guaranteed payments received as ordinary income.

Accepted Answer

A) True 
 B)False

Question 5

On January 1,2019,Laura Wang contributed $30,000 cash in exchange for 30 shares of stock in Suki Inc.,an S corporation.On May 12,Laura loaned $8,500 to Suki in exchange for a 5-year interest-bearing note.Laura's pro rata share of Suki's 2019 ordinary business loss was $34,100,and she received no cash distributions during the year.Assume the excess business loss limitation does not apply.Which of the following statements is accurate?

Accepted Answer

A) Laura can deduct $30,000 of the loss in 2019.On January 1,2020,the basis in her Suki stock is zero,and the basis in her Suki note is $8,500. 
B) Laura can deduct $34,100 of the loss in 2019.On January 1,2020,the basis in her Suki stock is $4,400,and the basis in her Suki note is zero. 
C) Laura can deduct $34,100 of the loss in 2019.On January 1,2020,the basis in her Suki stock is zero,and the basis in her Suki note is $4,400. 
D) None of the above is accurate. 
A) Laura can deduct $30,000 of the loss in 2019.On January 1,2020,the basis in her Suki stock is zero,and the basis in her Suki note is $8,500. 
B) Laura can deduct $34,100 of the loss in 2019.On January 1,2020,the basis in her Suki stock is $4,400,and the basis in her Suki note is zero. 
C) Laura can deduct $34,100 of the loss in 2019.On January 1,2020,the basis in her Suki stock is zero,and the basis in her Suki note is $4,400. 
D) None of the above is accurate.

Question 6

In 2019,Mike Elfred received a $165,000 salary from his employer and generated $39,000 net earnings from self-employment from his small business.Which of the following statements is true?

Accepted Answer

A) Mike does not owe any self-employment tax because his salary exceeded the 2019 base amount ($132,900)for federal employment tax. 
B) Mike owes both the Medicare and Social Security tax portions of self-employment tax on his $39,000 earnings from his small business. 
C) Mike owes Medicare tax but not Social Security tax on his $39,000 earnings from his small business. 
D) Mike owes Social Security tax but not Medicare tax on his $39,000 earnings from his small business. 
A) Mike does not owe any self-employment tax because his salary exceeded the 2019 base amount ($132,900)for federal employment tax. 
B) Mike owes both the Medicare and Social Security tax portions of self-employment tax on his $39,000 earnings from his small business. 
C) Mike owes Medicare tax but not Social Security tax on his $39,000 earnings from his small business. 
D) Mike owes Social Security tax but not Medicare tax on his $39,000 earnings from his small business.

Question 7

On January 1 of this year,Conrad Nelson contributed $15,000 cash in exchange for 50 shares of stock in Sterling Inc.,an S corporation.Sterling employs Conrad as its director of marketing.Conrad's current year salary was $70,000 and his pro rata share of Sterling's ordinary business income was $16,800.During the year,Conrad received a $9,000 cash distribution with respect to his Sterling stock.Compute Conrad's basis in his Sterling stock at year end.

Accepted Answer

A) $15,000 
B) $22,800 
C) $31,800 
D) $92,800 
A) $15,000 
B) $22,800 
C) $31,800 
D) $92,800

Question 8

A shareholder in an S corporation can include only his or her own loans to the corporation in tax basis.

Accepted Answer

A) True 
 B)False

Question 9

Alex is a partner in a calendar year partnership.His partnership Schedule K-1 for the current tax year showed the following:   Alex has a $7,000 loss carryforward from the partnership last year,which he could not deduct because of the basis limitation.What is his tax basis in his partnership interest at the end of the current tax year?

Accepted Answer

A) $41,000 
B) $32,500 
C) $39,500 
D) $34,000 
A) $41,000 
B) $32,500 
C) $39,500 
D) $34,000

Question 10

John's share of partnership loss was $60,000.He had only enough tax basis to deduct $34,000 of the loss.He may deduct the remaining loss against other income in the following year,regardless of what happens in the partnership.

Accepted Answer

A) True 
 B)False

Question 11

Alan is a general partner in ADK Partnership.His partnership Schedule K-1 reports $50,000 ordinary business income,$22,000 guaranteed payment,$5,000 long-term capital gain,and $400 dividend income.Which of these items are subject to self-employment tax?

Accepted Answer

A) $50,000 ordinary income 
B) $50,000 ordinary business income and $22,000 guaranteed payment 
C) $50,000 ordinary business income,$22,000 guaranteed payment,and $5,000 long-term capital gain 
D) All income reported on a general partner's Schedule K-1 are subject to self-employment tax 
A) $50,000 ordinary income 
B) $50,000 ordinary business income and $22,000 guaranteed payment 
C) $50,000 ordinary business income,$22,000 guaranteed payment,and $5,000 long-term capital gain 
D) All income reported on a general partner's Schedule K-1 are subject to self-employment tax

Question 12

Gabriel operates his business as a sole proprietorship.This year the business incurred an operating loss.The loss can be used to offset other business income he earned during the year.

Accepted Answer

A) True 
 B)False

Question 13

Cramer Corporation and Mr.Chips formed a general partnership.Cramer contributed $500,000 cash,and Mr.Chips contributed a building with a $500,000 FMV and $300,000 tax basis.The partnership immediately borrowed $700,000 of recourse debt.What is Mr.Chips' tax basis in its partnership interest?

Accepted Answer

A) $500,000 
B) $1,200,000 
C) $850,000 
D) $650,000 
A) $500,000 
B) $1,200,000 
C) $850,000 
D) $650,000

Question 14

Carter's share of a partnership's operating loss is $17,200.His tax basis in his partnership interest before any adjustment for this loss is $26,000.If Carter has no excess business loss,he may deduct the full partnership loss on his individual tax return.

Accepted Answer

A) True 
 B)False

Question 15

Orange,Inc.is a calendar year partnership with the following current year information:   On January 1,John James bought 50% general interest in Orange,Inc.for $30,000.How much of the operating loss may John deduct on his Form 1040? Assume the excess business loss limitation does not apply.

Accepted Answer

A) $60,000 
B) $30,000 
C) $40,000 
D) $50,000 
A) $60,000 
B) $30,000 
C) $40,000 
D) $50,000

Question 16

Cramer Corporation and Mr.Chips formed a general partnership.Cramer contributed $500,000 cash,and Mr.Chips contributed a building with a $500,000 FMV and $300,000 tax basis.The partnership immediately borrowed $700,000 of recourse debt.What is Cramer's tax basis in its partnership interest?

Accepted Answer

A) $500,000 
B) $1,200,000 
C) $850,000 
D) $650,000 
A) $500,000 
B) $1,200,000 
C) $850,000 
D) $650,000

Question 17

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

Accepted Answer

A) Every member of an LLC has limited liability for the LLC's debts. 
B) An LLC with only one member is generally treated as a corporation for income tax purposes. 
C) An LLC with more than one member is generally treated as a partnership for income tax purposes. 
D) State laws do not limit the number of members or the type of entity that can be a member in an LLC. 
A) Every member of an LLC has limited liability for the LLC's debts. 
B) An LLC with only one member is generally treated as a corporation for income tax purposes. 
C) An LLC with more than one member is generally treated as a partnership for income tax purposes. 
D) State laws do not limit the number of members or the type of entity that can be a member in an LLC.

Question 18

Cramer Corporation and Mr.Chips formed a partnership in which Cramer is the general partner and Mr.Chips is a limited partner.Cramer contributed $500,000 cash,and Mr.Chips contributed a building with a $500,000 FMV and $300,000 tax basis.The partnership immediately borrowed $700,000 of recourse debt.What is Cramer's tax basis in its partnership interest?

Accepted Answer

A) $500,000 
B) $1,200,000 
C) $850,000 
D) $650,000 
A) $500,000 
B) $1,200,000 
C) $850,000 
D) $650,000

Question 19

Haddie's Hats is a regular corporation.The business must file an income tax return each year to report its taxable income or loss and pay any related taxes.

Accepted Answer

A) True 
 B)False

Question 20

Kelly operates a sole proprietorship with qualified business income of $920,000.Her business paid W-2 wages of $250,000 and owns depreciable tangible property with an unadjusted basis of $410,000.Compute Kelly's allowable QBI deduction before the taxable income limitation.

Accepted Answer

A) $184,000 
B) $125,000 
C) $72,750 
D) $0 
A) $184,000 
B) $125,000 
C) $72,750 
D) $0

Partners may deduct on their individual income tax returns an amount equal to 100% of self-employment tax paid.

Mutt and Jeff are general partners in M&J Partnership and share profits and losses equally.Partnership operations for the current tax year were: Mutt's tax basis in his partnership interest at the beginning of the current year was $12,000.What is his basis at the beginning of next year?

The FICA taxes authorized by the Federal Insurance Contribution Act is imposed upon all of the employee's wages for the year.

A partnership deducts guaranteed payments paid to its partners in computing ordinary income,and partners report guaranteed payments received as ordinary income.

In 2019,Mike Elfred received a $165,000 salary from his employer and generated $39,000 net earnings from self-employment from his small business.Which of the following statements is true?

A shareholder in an S corporation can include only his or her own loans to the corporation in tax basis.

John's share of partnership loss was $60,000.He had only enough tax basis to deduct $34,000 of the loss.He may deduct the remaining loss against other income in the following year,regardless of what happens in the partnership.

Alan is a general partner in ADK Partnership.His partnership Schedule K-1 reports $50,000 ordinary business income,$22,000 guaranteed payment,$5,000 long-term capital gain,and $400 dividend income.Which of these items are subject to self-employment tax?

Gabriel operates his business as a sole proprietorship.This year the business incurred an operating loss.The loss can be used to offset other business income he earned during the year.

Cramer Corporation and Mr.Chips formed a general partnership.Cramer contributed $500,000 cash,and Mr.Chips contributed a building with a $500,000 FMV and $300,000 tax basis.The partnership immediately borrowed $700,000 of recourse debt.What is Mr.Chips' tax basis in its partnership interest?

Carter's share of a partnership's operating loss is $17,200.His tax basis in his partnership interest before any adjustment for this loss is $26,000.If Carter has no excess business loss,he may deduct the full partnership loss on his individual tax return.

Orange,Inc.is a calendar year partnership with the following current year information: On January 1,John James bought 50% general interest in Orange,Inc.for $30,000.How much of the operating loss may John deduct on his Form 1040? Assume the excess business loss limitation does not apply.

Cramer Corporation and Mr.Chips formed a general partnership.Cramer contributed $500,000 cash,and Mr.Chips contributed a building with a $500,000 FMV and $300,000 tax basis.The partnership immediately borrowed $700,000 of recourse debt.What is Cramer's tax basis in its partnership interest?

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

Haddie's Hats is a regular corporation.The business must file an income tax return each year to report its taxable income or loss and pay any related taxes.

Kelly operates a sole proprietorship with qualified business income of $920,000.Her business paid W-2 wages of $250,000 and owns depreciable tangible property with an unadjusted basis of $410,000.Compute Kelly's allowable QBI deduction before the taxable income limitation.

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

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

Partners may deduct on their individual income tax returns an amount equal to 100% of self-employment tax paid.

Mutt and Jeff are general partners in M&J Partnership and share profits and losses equally.Partnership operations for the current tax year were: Mutt's tax basis in his partnership interest at the beginning of the current year was $12,000.What is his basis at the beginning of next year?

The FICA taxes authorized by the Federal Insurance Contribution Act is imposed upon all of the employee's wages for the year.

A partnership deducts guaranteed payments paid to its partners in computing ordinary income,and partners report guaranteed payments received as ordinary income.

In 2019,Mike Elfred received a $165,000 salary from his employer and generated $39,000 net earnings from self-employment from his small business.Which of the following statements is true?

A shareholder in an S corporation can include only his or her own loans to the corporation in tax basis.

John's share of partnership loss was $60,000.He had only enough tax basis to deduct $34,000 of the loss.He may deduct the remaining loss against other income in the following year,regardless of what happens in the partnership.

Alan is a general partner in ADK Partnership.His partnership Schedule K-1 reports $50,000 ordinary business income,$22,000 guaranteed payment,$5,000 long-term capital gain,and $400 dividend income.Which of these items are subject to self-employment tax?

Gabriel operates his business as a sole proprietorship.This year the business incurred an operating loss.The loss can be used to offset other business income he earned during the year.

Cramer Corporation and Mr.Chips formed a general partnership.Cramer contributed $500,000 cash,and Mr.Chips contributed a building with a $500,000 FMV and $300,000 tax basis.The partnership immediately borrowed $700,000 of recourse debt.What is Mr.Chips' tax basis in its partnership interest?

Carter's share of a partnership's operating loss is $17,200.His tax basis in his partnership interest before any adjustment for this loss is $26,000.If Carter has no excess business loss,he may deduct the full partnership loss on his individual tax return.

Orange,Inc.is a calendar year partnership with the following current year information: On January 1,John James bought 50% general interest in Orange,Inc.for $30,000.How much of the operating loss may John deduct on his Form 1040? Assume the excess business loss limitation does not apply.

Cramer Corporation and Mr.Chips formed a general partnership.Cramer contributed $500,000 cash,and Mr.Chips contributed a building with a $500,000 FMV and $300,000 tax basis.The partnership immediately borrowed $700,000 of recourse debt.What is Cramer's tax basis in its partnership interest?

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

Haddie's Hats is a regular corporation.The business must file an income tax return each year to report its taxable income or loss and pay any related taxes.

Kelly operates a sole proprietorship with qualified business income of $920,000.Her business paid W-2 wages of $250,000 and owns depreciable tangible property with an unadjusted basis of $410,000.Compute Kelly's allowable QBI deduction before the taxable income limitation.

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