Question 1

Which of the following statements about S corporations is true?

Accepted Answer

A)  An S corporation has unlimited liability. 
B)  An S corporation is a flow-through entity for federal income tax purposes. 
C)  S corporations can only have 75 shareholders. 
D)  S corporations can have several classes of stock. 
A)  An S corporation has unlimited liability. 
B)  An S corporation is a flow-through entity for federal income tax purposes. 
C)  S corporations can only have 75 shareholders. 
D)  S corporations can have several classes of stock.

Question 2

Matthew earned $150,000 in wages during 2019. FICA taxes withheld by his employer would have been $11,475.

Accepted Answer

A) True 
 B)False

Question 3

A limited liability company is always taxed as a partnership, regardless of the number of its members.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements regarding a partner's tax basis in a partnership interest is true?

Accepted Answer

A)  Partnership tax basis is increased annually by cash distributions from the partnership. 
B)  Partnership tax basis is reduced by the partner's share of nondeductible partnership expenses. 
C)  Partnership tax basis is reduced by the partner's share of nontaxable partnership income. 
D)  Partnership tax basis becomes negative if allocable losses exceed basis. 
A)  Partnership tax basis is increased annually by cash distributions from the partnership. 
B)  Partnership tax basis is reduced by the partner's share of nondeductible partnership expenses. 
C)  Partnership tax basis is reduced by the partner's share of nontaxable partnership income. 
D)  Partnership tax basis becomes negative if allocable losses exceed basis.

Question 5

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 6

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

Question 7

A major advantage of an S corporation is the ability to specially allocate losses to specific members of the company.

Accepted Answer

A) True 
 B)False

Question 8

Adam and Barbara formed a partnership to construct an apartment building. Adam contributed $500,000 cash and Barbara contributed land ($500,000 FMV and $250,000 basis) in exchange for a 50 percent interest in AB Partnership. Immediately after its formation, the partnership borrowed $600,000 from a local bank to begin construction. Compute each partner's basis in their partnership interest, assuming that:
Adam and Barbara are both general partners.Adam is a limited partner and Barbara is a general partner.

Accepted Answer

a. If both are general partners, Adam's

Question 9

Corporations cannot be shareholders in an S corporation.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements regarding the home office deduction is true?

Accepted Answer

A)  In order to qualify for the deduction, a portion of the taxpayer's home must be used regularly and exclusively to meet with clients or customers. 
B)  A home office deduction is not allowed for using the home office for administrative or management activities only. 
C)  The home office deduction is limited to the taxable income of the business before the deduction. 
D)  A depreciation deduction is not allowed for a home office. 
A)  In order to qualify for the deduction, a portion of the taxpayer's home must be used regularly and exclusively to meet with clients or customers. 
B)  A home office deduction is not allowed for using the home office for administrative or management activities only. 
C)  The home office deduction is limited to the taxable income of the business before the deduction. 
D)  A depreciation deduction is not allowed for a home office.

Question 11

Which of the following statements concerning partnerships is false?

Accepted Answer

A)  A properly-drafted partnership agreement is crucial. 
B)  A general partner's basis in a partnership includes his share of partnership debt. 
C)  Limited partnerships must have at least one general partner. 
D)  A partner is taxed annually on only that portion of a partnership's taxable income that is actually distributed. 
A)  A properly-drafted partnership agreement is crucial. 
B)  A general partner's basis in a partnership includes his share of partnership debt. 
C)  Limited partnerships must have at least one general partner. 
D)  A partner is taxed annually on only that portion of a partnership's taxable income that is actually distributed.

Question 12

A limited liability company that has only one member is generally treated as a disregarded entity for federal tax purposes.

Accepted Answer

A) True 
 B)False

Question 13

During 2020, Elena generated $24,500 of earnings on Schedule C. If Elena had no other earned income, how much self-employment tax will she owe on her Schedule C net profit?

Accepted Answer

A)  $3,749 
B)  $3,259 
C)  $3,009 
D)  $3,462 
A)  $3,749 
B)  $3,259 
C)  $3,009 
D)  $3,462

Question 14

Which of the following statements regarding sole proprietorships is false?

Accepted Answer

A)  A sole proprietorship has no legal identity separate from that of its owner. 
B)  Sole proprietorships are the most common form of business entity in the U.S. 
C)  The cash flow generated by a sole proprietorship belongs to the owner. 
D)  The assets and liabilities of a sole proprietorship are held in the name of the business, not the owner. 
A)  A sole proprietorship has no legal identity separate from that of its owner. 
B)  Sole proprietorships are the most common form of business entity in the U.S. 
C)  The cash flow generated by a sole proprietorship belongs to the owner. 
D)  The assets and liabilities of a sole proprietorship are held in the name of the business, not the owner.

Question 15

Alice is a partner in Axel Partnership. Her share of the partnership's current ordinary business income was $100,000. She received a $60,000 cash distribution from the partnership on December 1. Alice qualifies for the QBI deduction, without regard to the wage or taxable income limitations. Assuming that Alice's marginal tax rate is 37%, calculate her after-tax cash flow from the partnership this year.

Accepted Answer

A)  $70,400 
B)  $30,400 
C)  $45,200 
D)  $29,600 
A)  $70,400 
B)  $30,400 
C)  $45,200 
D)  $29,600

Question 16

On June 1, Jefferson had a basis in his partnership interest of $75,000. On June 2, he received a cash distribution from the partnership of $28,000. All of the cash distribution is taxable.

Accepted Answer

A) True 
 B)False

Question 17

Businesses are required by law to withhold federal income tax from the compensation paid to their employees.

Accepted Answer

A) True 
 B)False

Question 18

A partnership is an unincorporated business activity owned by at least two business associates.

Accepted Answer

A) True 
 B)False

Question 19

Sue's 2020 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 these choices are correct 
A)  $25,127 
B)  $30,000 
C)  $29,480 
D)  None of these choices are correct

Question 20

Mutt and Jeff are general partners in M&J Partnership and share profits and losses equally. Partnership operations for the current tax year were: $\begin{array}{llr}
  \text { ordinary business income } &\$100,000\
 \text {Long-term capital gain  } &10,000\
 \text { Total distributions to partners } &60,000
\end{array}$

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

Which of the following statements about S corporations is true?

Matthew earned $150,000 in wages during 2019. FICA taxes withheld by his employer would have been $11,475.

A limited liability company is always taxed as a partnership, regardless of the number of its members.

Which of the following statements regarding a partner's tax basis in a partnership interest is true?

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

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

A major advantage of an S corporation is the ability to specially allocate losses to specific members of the company.

Corporations cannot be shareholders in an S corporation.

Which of the following statements regarding the home office deduction is true?

Which of the following statements concerning partnerships is false?

A limited liability company that has only one member is generally treated as a disregarded entity for federal tax purposes.

During 2020, Elena generated $24,500 of earnings on Schedule C. If Elena had no other earned income, how much self-employment tax will she owe on her Schedule C net profit?

Which of the following statements regarding sole proprietorships is false?

On June 1, Jefferson had a basis in his partnership interest of $75,000. On June 2, he received a cash distribution from the partnership of $28,000. All of the cash distribution is taxable.

Businesses are required by law to withhold federal income tax from the compensation paid to their employees.

A partnership is an unincorporated business activity owned by at least two business associates.

Sue's 2020 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?

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

Which of the following statements about S corporations is true?

Matthew earned $150,000 in wages during 2019. FICA taxes withheld by his employer would have been $11,475.

A limited liability company is always taxed as a partnership, regardless of the number of its members.

Which of the following statements regarding a partner's tax basis in a partnership interest is true?

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

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

A major advantage of an S corporation is the ability to specially allocate losses to specific members of the company.

Corporations cannot be shareholders in an S corporation.

Which of the following statements regarding the home office deduction is true?

Which of the following statements concerning partnerships is false?

A limited liability company that has only one member is generally treated as a disregarded entity for federal tax purposes.

During 2020, Elena generated $24,500 of earnings on Schedule C. If Elena had no other earned income, how much self-employment tax will she owe on her Schedule C net profit?

Which of the following statements regarding sole proprietorships is false?

On June 1, Jefferson had a basis in his partnership interest of $75,000. On June 2, he received a cash distribution from the partnership of $28,000. All of the cash distribution is taxable.

Businesses are required by law to withhold federal income tax from the compensation paid to their employees.

A partnership is an unincorporated business activity owned by at least two business associates.

Sue's 2020 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?

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