Question 1

​The Net Investment Income Tax (NIIT) is owed by both high income individuals and corporations.

Accepted Answer

A) True 
 B)False

Question 2

Of the corporate types of entities, all are subject to double taxation on current earnings.

Accepted Answer

A) True 
 B)False

Question 3

In its first year of operations (2016), Lavender, Inc. (a C corporation) has gross receipts of $8 million and net income of $2 million. Lavender is not subject to the AMT for 2016.

Accepted Answer

A) True 
 B)False

Question 4

Molly transfers land with an adjusted basis of $28,000 and a fair market value of $65,000 to the Sand Partnership for a 30% ownership interest. The land is encumbered by a mortgage of $18,000 which the partnership assumes. Her basis for her ownership interest is $10,000 ($28,000 - $18,000).

Accepted Answer

A) True 
 B)False

Question 5

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. 
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 6

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 20%. 
D) Subject to double taxation. 
E) Eligible for special allocations. 
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 20%. 
D) Subject to double taxation. 
E) Eligible for special allocations.

Question 7

C corporations and S corporations can generate an AMT adjustment known as Adjusted Current Earnings (ACE).

Accepted Answer

A) True 
 B)False

Question 8

Mr. and Ms. Smith's partnership owns the following assets: $\begin{array}{lrr}&\text { Adjusted Basis }&\text { Fair Market Value }\
\text { Accounts receivable } & \$-0- & \$ 60,000 \
\text { Inventory } & 20,000 & 30,000 \
\text { Machinery and equipment* } & 50,000 & 90,000 \
\text { Buil dings** } & 120,000 & 170,000 \
\text { Land } & 80,000 & 140,000 \
& \$ \mathbf{2 7 0 , 0 0 0} & \$ 490,000
\end{array}$ * Potential § 1245 recapture of $45,000. ** Straight-line depreciation was used.
Mr) and Ms. Smith each have a basis for their partnership interest of $135,000. Calculate their combined recognized gain or loss and classify it as capital or ordinary if they sell their partnership interests for $500,000.

Accepted Answer

A) $230,000 ordinary income. 
B) $230,000 capital gain. 
C) $115,000 ordinary income and $115,000 capital gain. 
D) $110,000 ordinary income and $120,000 capital gain. 
E) None of the above. 
A) $230,000 ordinary income. 
B) $230,000 capital gain. 
C) $115,000 ordinary income and $115,000 capital gain. 
D) $110,000 ordinary income and $120,000 capital gain. 
E) None of the above.

Question 9

Each of the following can pass profits and losses through to the owners: general partnership, limited partnership, S corporation, and limited liability company.

Accepted Answer

A) True 
 B)False

Question 10

Melinda's basis for her partnership interest is $250,000. If she receives a cash distribution of $290,000, her recognized gain is $40,000 and her basis for her partnership interest is reduced to $0. Melinda is still a partner after the distribution.

Accepted Answer

A) True 
 B)False

Question 11

From the viewpoint of the entity and the employee recipient, what is the ideal fringe benefit?

Accepted Answer

The ideal fringe benefit is on

Question 12

Under what circumstances, if any, do the § 469 passive activity loss rules apply to C corporations?

Accepted Answer

The general passive activity loss rules

Question 13

Do the § 465 at-risk rules apply to partnerships, LLCs, and S corporations?

Accepted Answer

The statutory language of § 465 does not

Question 14

Roger owns 40% of the stock of Gold, Inc. (adjusted basis of $800,000). Silver redeems 60% of Roger's shares for $900,000. If the stock redemption qualifies for return of capital treatment, Roger's recognized gain is $100,000.

Accepted Answer

A) True 
 B)False

Question 15

John wants to buy a business whose assets have appreciated in value. If the business is operated as a C corporation, it does not matter to John whether he purchases the assets or the stock.

Accepted Answer

A) True 
 B)False

Question 16

Techniques are available that may permit a C corporation to avoid double taxation.

Accepted Answer

A) True 
 B)False

Question 17

Match the following statements:
-Organization costs

Accepted Answer

A) For the corporate taxpayer, are taxed using the regular tax rates. 
B) Must be capitalized, but can be amortized over 180 months. 
C) For the corporate taxpayer, the rate is 20%. 
D) For the corporate taxpayer, cannot be deducted at all in the current tax year. 
E) For the corporate taxpayer, limited to 10% of taxable income before certain deductions. 
A) For the corporate taxpayer, are taxed using the regular tax rates. 
B) Must be capitalized, but can be amortized over 180 months. 
C) For the corporate taxpayer, the rate is 20%. 
D) For the corporate taxpayer, cannot be deducted at all in the current tax year. 
E) For the corporate taxpayer, limited to 10% of taxable income before certain deductions.

Question 18

If the IRS reclassifies debt as equity under § 385, the repayment of the debt by the corporation to the shareholder automatically is treated as a dividend.

Accepted Answer

A) True 
 B)False

Question 19

S corporation status always avoids double taxation.

Accepted Answer

A) True 
 B)False

Question 20

Mercedes owns a 30% interest in Magenta Partnership (basis of $52,000) which she sells to Calvin for $65,000. Mercedes' recognized gain of $13,000 will be classified as capital gain.

Accepted Answer

A) True 
 B)False

The Net Investment Income Tax (NIIT) is owed by both high income individuals and corporations.

Of the corporate types of entities, all are subject to double taxation on current earnings.

In its first year of operations (2016), Lavender, Inc. (a C corporation) has gross receipts of $8 million and net income of $2 million. Lavender is not subject to the AMT for 2016.

Molly transfers land with an adjusted basis of $28,000 and a fair market value of $65,000 to the Sand Partnership for a 30% ownership interest. The land is encumbered by a mortgage of $18,000 which the partnership assumes. Her basis for her ownership interest is $10,000 ($28,000 - $18,000).

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

Match the following statements: -Partnerships

C corporations and S corporations can generate an AMT adjustment known as Adjusted Current Earnings (ACE).

Each of the following can pass profits and losses through to the owners: general partnership, limited partnership, S corporation, and limited liability company.

Melinda's basis for her partnership interest is $250,000. If she receives a cash distribution of $290,000, her recognized gain is $40,000 and her basis for her partnership interest is reduced to $0. Melinda is still a partner after the distribution.

From the viewpoint of the entity and the employee recipient, what is the ideal fringe benefit?

Under what circumstances, if any, do the § 469 passive activity loss rules apply to C corporations?

Do the § 465 at-risk rules apply to partnerships, LLCs, and S corporations?

Roger owns 40% of the stock of Gold, Inc. (adjusted basis of $800,000). Silver redeems 60% of Roger's shares for $900,000. If the stock redemption qualifies for return of capital treatment, Roger's recognized gain is $100,000.

John wants to buy a business whose assets have appreciated in value. If the business is operated as a C corporation, it does not matter to John whether he purchases the assets or the stock.

Techniques are available that may permit a C corporation to avoid double taxation.

Match the following statements: -Organization costs

If the IRS reclassifies debt as equity under § 385, the repayment of the debt by the corporation to the shareholder automatically is treated as a dividend.

S corporation status always avoids double taxation.

Mercedes owns a 30% interest in Magenta Partnership (basis of $52,000) which she sells to Calvin for $65,000. Mercedes' recognized gain of $13,000 will be classified as capital gain.

Understanding and Working With the Federal Tax Law

Corporations Introduction and Operating Rules

Corporations Special Situations

Corporations Organization and Capital Structure

Corporations Earnings Profits and Dividend Distributions

Corporations Redemptions and Liquidations

Corporations Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships Formation Operation and Basis

Partnerships Distributions Transfer of Interests and Terminations

S Corporations

Taxes on the Financial Statements

Exempt Entities

Multi-State Corporate Taxations

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 13: Comparative Forms of Doing Business

​The Net Investment Income Tax (NIIT) is owed by both high income individuals and corporations.

Of the corporate types of entities, all are subject to double taxation on current earnings.

In its first year of operations (2016), Lavender, Inc. (a C corporation) has gross receipts of $8 million and net income of $2 million. Lavender is not subject to the AMT for 2016.

Molly transfers land with an adjusted basis of $28,000 and a fair market value of $65,000 to the Sand Partnership for a 30% ownership interest. The land is encumbered by a mortgage of $18,000 which the partnership assumes. Her basis for her ownership interest is $10,000 ($28,000 - $18,000).

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

Match the following statements: -Partnerships

C corporations and S corporations can generate an AMT adjustment known as Adjusted Current Earnings (ACE).

Each of the following can pass profits and losses through to the owners: general partnership, limited partnership, S corporation, and limited liability company.

Melinda's basis for her partnership interest is $250,000. If she receives a cash distribution of $290,000, her recognized gain is $40,000 and her basis for her partnership interest is reduced to $0. Melinda is still a partner after the distribution.

From the viewpoint of the entity and the employee recipient, what is the ideal fringe benefit?

Under what circumstances, if any, do the § 469 passive activity loss rules apply to C corporations?

Do the § 465 at-risk rules apply to partnerships, LLCs, and S corporations?

Roger owns 40% of the stock of Gold, Inc. (adjusted basis of $800,000). Silver redeems 60% of Roger's shares for $900,000. If the stock redemption qualifies for return of capital treatment, Roger's recognized gain is $100,000.

John wants to buy a business whose assets have appreciated in value. If the business is operated as a C corporation, it does not matter to John whether he purchases the assets or the stock.

Techniques are available that may permit a C corporation to avoid double taxation.

Match the following statements: -Organization costs

If the IRS reclassifies debt as equity under § 385, the repayment of the debt by the corporation to the shareholder automatically is treated as a dividend.

S corporation status always avoids double taxation.

Mercedes owns a 30% interest in Magenta Partnership (basis of $52,000) which she sells to Calvin for $65,000. Mercedes' recognized gain of $13,000 will be classified as capital gain.

Understanding and Working With the Federal Tax Law

Corporations Introduction and Operating Rules

Corporations Special Situations

Corporations Organization and Capital Structure

Corporations Earnings Profits and Dividend Distributions

Corporations Redemptions and Liquidations

Corporations Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships Formation Operation and Basis

Partnerships Distributions Transfer of Interests and Terminations

S Corporations

Taxes on the Financial Statements

Exempt Entities

Multi-State Corporate Taxations

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

The Net Investment Income Tax (NIIT) is owed by both high income individuals and corporations.