Exam 13: Comparative Forms of Doing Business

Agnes owns a sole proprietorship for which the assets have appreciated in value. If she is going to sell the business to Abner, should she structure the sale as (1) a sale of the individual assets or (2) a sale of the sole proprietorship?

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

With respect to special allocations, is the S corporation treated more like a partnership or a C corporation?

Why are S corporations not subject to the accumulated earnings tax?

Pelican, Inc., a C corporation, distributes $275,000 to its shareholder, Jean, and land worth $275,000 (adjusted basis of $185,000) to its shareholder, Pam. Pelican has earnings and profits of $900,000. Determine the tax consequences to Pelican, Jean, and Pam.

Khalid contributes land (fair market value of $700,000; adjusted basis of $200,000) and Dan contributes $700,000 cash to form Teal Partnership. Khalid and Dan each own a 50% interest. One year later, Teal sells the land for $800,000. How much gain is recognized by each partner?

In the sale of a partnership, does the way the sale is structured (i.e., sale of the partnership interests versus the sale of the partnership assets) produce different tax consequences for the sellers?

The profits of a business owned by Taylor (60%) and Maggie (40%) for the current tax year are $100,000. If the business is a C corporation or an S corporation, there is no effect on Taylor's basis in her stock. If the business is a partnership or an LLC, Taylor's basis in her partnership interest or basis in her stock is increased by $60,000.

An effective way for all C corporations to avoid double taxation is not to make dividend distributions.