Question 1

LLC  members have more flexibility than corporate shareholders to alter their legal arrangements with respect to one another, the entity, and with outsiders.

Accepted Answer

A) True 
 B)False

Question 2

Which legal entity provides the least flexible legal arrangement for owners?

Accepted Answer

A)  Corporation. 
B)  LLC. 
C)  Partnership. 
D)  Sole proprietorship. 
A)  Corporation. 
B)  LLC. 
C)  Partnership. 
D)  Sole proprietorship.

Question 3

Which of the following statements is false for a C corporation that incurred a net operating loss for a tax year beginning before 2018?

Accepted Answer

A)  If it carries back the NOL and/or carries it forward, it may offset up to 80 percent of the taxable income (before the NOL deduction) in those years. 
B)  It may carry the NOL forward for up to 20 years and offset up to 100 percent of the taxable income (before the NOL deduction) in those years. 
C)  It may carry the NOL back two years and offset up to 100 percent of the taxable income (before the NOL deduction) in those years. 
D)  None of these (selecting this option means you believe all of the other responses are true). 
A)  If it carries back the NOL and/or carries it forward, it may offset up to 80 percent of the taxable income (before the NOL deduction) in those years. 
B)  It may carry the NOL forward for up to 20 years and offset up to 100 percent of the taxable income (before the NOL deduction) in those years. 
C)  It may carry the NOL back two years and offset up to 100 percent of the taxable income (before the NOL deduction) in those years. 
D)  None of these (selecting this option means you believe all of the other responses are true).

Question 4

Both tax and nontax objectives should be considered when choosing the entity type for a new business.

Accepted Answer

A) True 
 B)False

Question 5

In 2020, Aspen Corporation reported $120,000 of taxable income before the net operating loss (NOL) deduction. It had an NOL carryover of $60,000 from 2018 and an NOL carryover from 2019 of $40,000. How much tax will Aspen Corporation pay on its 2020 tax return?

Accepted Answer

The answer of In 2020, Aspen Corporation reported $120,000 of...

Question 6

Rodger owns 100 percent of the shares in Trevor Incorporated a C corporation. Assume the following for the current year:
   Given these assumptions, how much cash does Rodger have from the dividend after paying taxes on the distribution?

Accepted Answer

The answer of Rodger owns 100 percent of the shares...

Question 7

Roberto and Reagan are both 25-percent owner/managers for Bright Light Incorporated. Roberto runs the retail store in Sacramento, California, and Reagan runs the retail store in San Francisco, California. Bright Light generated a $132,000 profit companywide made up of a $77,000 profit from the Sacramento store, a ($30,000) loss from the San Francisco store, and a combined $85,000 profit from the remaining stores. If Bright Light is taxed as a partnership and it is decided that both Roberto and Reagan will be allocated 70 percent of his own store's profit, with the remaining profits allocated pro rata among all the owners, how much income will be allocated to Reagan in total?

Accepted Answer

A)  ($25,350.00). 
B)  ($21,000.00). 
C)  $3,775.00. 
D)  $21,575.00. 
A)  ($25,350.00). 
B)  ($21,000.00). 
C)  $3,775.00. 
D)  $21,575.00.

Question 8

If a C corporation incurred a net operating loss in 2017, it could carry the loss back two years and forward 20 years to offset income in those years. However, it may offset only 80 percent of the taxable income before the NOL deduction in those years.

Accepted Answer

A) True 
 B)False

Question 9

Sole proprietorships that are not organized as LLCs  are not treated as legal entities separate from their individual owners.

Accepted Answer

A) True 
 B)False

Question 10

S corporation shareholders who work for the S corporation receive compensation in the form of guaranteed payments.

Accepted Answer

A) True 
 B)False

Question 11

Owners who work for entities taxed as a partnership receive guaranteed payments as compensation. The guaranteed payments are not self-employment income.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is true for entity owners who pay the self-employment tax and the additional Medicare tax?

Accepted Answer

A)  Both the self-employment tax and the additional Medicare tax are deductible for AGI in full. 
B)  Half of the self-employment tax and half of the additional Medicare tax are deductible for AGI. 
C)  Half of the self-employment tax and none of the additional Medicare tax are deductible for AGI. 
D)  None of the self-employment tax and none of the additional Medicare tax are deductible for AGI. 
A)  Both the self-employment tax and the additional Medicare tax are deductible for AGI in full. 
B)  Half of the self-employment tax and half of the additional Medicare tax are deductible for AGI. 
C)  Half of the self-employment tax and none of the additional Medicare tax are deductible for AGI. 
D)  None of the self-employment tax and none of the additional Medicare tax are deductible for AGI.

Question 13

Tax rules require that entities be classified the same way for tax purposes as they are classified for legal purposes.

Accepted Answer

A) True 
 B)False

Question 14

In certain circumstances, C corporation shareholders can elect to change theC corporation to a flow-through entity for tax purposes.

Accepted Answer

A) True 
 B)False

Question 15

If you were seeking an entity with the most favorable tax treatment regarding (1) the number of owners allowed, (2) the flexibility to select your accounting period, and (3) the availability of preferential capital gains rates when selling your ownership interest, which entity should you decide to use?

Accepted Answer

A)  C corporation. 
B)  S corporation. 
C)  Partnership. 
D)  Sole proprietorship. 
A)  C corporation. 
B)  S corporation. 
C)  Partnership. 
D)  Sole proprietorship.

Question 16

Which of the following statements is true regarding compensation paid to an owner of an entity taxed as a partnership who works for the entity?

Accepted Answer

A)  The compensation is deductible by the entity. 
B)  The compensation is self-employment income to the owner-worker. 
C)  The entity is not required to withhold FICA tax on the compensation it pays to the owner. 
D)  All of these choices are correct. 
A)  The compensation is deductible by the entity. 
B)  The compensation is self-employment income to the owner-worker. 
C)  The entity is not required to withhold FICA tax on the compensation it pays to the owner. 
D)  All of these choices are correct.

Question 17

An unincorporated entity with more than one owner is, by default, taxed as a partnership.

Accepted Answer

A) True 
 B)False

Question 18

When an employee/shareholder receives a business income allocation from an S corporation, what taxes apply to the business income allocation?

Accepted Answer

A)  FICA tax only. 
B)  Self-employment tax only. 
C)  FICA  and self-employment tax. 
D)  Income tax. 
E)  None of the choices are correct. 
A)  FICA tax only. 
B)  Self-employment tax only. 
C)  FICA  and self-employment tax. 
D)  Income tax. 
E)  None of the choices are correct.

Question 19

Crocker and Company (CC) is a C corporation. For the year, CC reported taxable income of $566,500. At the end of the year, CC distributed all its after-tax earnings to Jimmy, the company's sole shareholder. Jimmy's marginal ordinary tax rate is 37 percent and his marginal tax rate on dividends is 23.8 percent, including the net investment income tax. What is the overall tax rate on Crocker and Company's pretax income?

Accepted Answer

A)  18.8%. 
B)  23.8%. 
C)  21%. 
D)  39.8%. 
E)  44.8%. 
A)  18.8%. 
B)  23.8%. 
C)  21%. 
D)  39.8%. 
E)  44.8%.

Question 20

In 2020, BYC Corporation (a C corporation) had an NOL carryover from 2017 in the amount of $40,000. How much tax will BYC pay in 2020 if it reports taxable income from operations of $35,000 in 2020 before the NOL deduction?

Accepted Answer

None. BYC's NOL of ($40,000) is availabl

LLC members have more flexibility than corporate shareholders to alter their legal arrangements with respect to one another, the entity, and with outsiders.

Which legal entity provides the least flexible legal arrangement for owners?

Which of the following statements is false for a C corporation that incurred a net operating loss for a tax year beginning before 2018?

Both tax and nontax objectives should be considered when choosing the entity type for a new business.

In 2020, Aspen Corporation reported $120,000 of taxable income before the net operating loss (NOL) deduction. It had an NOL carryover of $60,000 from 2018 and an NOL carryover from 2019 of $40,000. How much tax will Aspen Corporation pay on its 2020 tax return?

Rodger owns 100 percent of the shares in Trevor Incorporated a C corporation. Assume the following for the current year: Given these assumptions, how much cash does Rodger have from the dividend after paying taxes on the distribution?

If a C corporation incurred a net operating loss in 2017, it could carry the loss back two years and forward 20 years to offset income in those years. However, it may offset only 80 percent of the taxable income before the NOL deduction in those years.

Sole proprietorships that are not organized as LLCs are not treated as legal entities separate from their individual owners.

S corporation shareholders who work for the S corporation receive compensation in the form of guaranteed payments.

Owners who work for entities taxed as a partnership receive guaranteed payments as compensation. The guaranteed payments are not self-employment income.

Which of the following statements is true for entity owners who pay the self-employment tax and the additional Medicare tax?

Tax rules require that entities be classified the same way for tax purposes as they are classified for legal purposes.

In certain circumstances, C corporation shareholders can elect to change theC corporation to a flow-through entity for tax purposes.

Which of the following statements is true regarding compensation paid to an owner of an entity taxed as a partnership who works for the entity?

An unincorporated entity with more than one owner is, by default, taxed as a partnership.

When an employee/shareholder receives a business income allocation from an S corporation, what taxes apply to the business income allocation?

In 2020, BYC Corporation (a C corporation) had an NOL carryover from 2017 in the amount of $40,000. How much tax will BYC pay in 2020 if it reports taxable income from operations of $35,000 in 2020 before the NOL deduction?

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Non-Liquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 4: Business Entities Overview

LLC members have more flexibility than corporate shareholders to alter their legal arrangements with respect to one another, the entity, and with outsiders.

Which legal entity provides the least flexible legal arrangement for owners?

Which of the following statements is false for a C corporation that incurred a net operating loss for a tax year beginning before 2018?

Both tax and nontax objectives should be considered when choosing the entity type for a new business.

In 2020, Aspen Corporation reported $120,000 of taxable income before the net operating loss (NOL) deduction. It had an NOL carryover of $60,000 from 2018 and an NOL carryover from 2019 of $40,000. How much tax will Aspen Corporation pay on its 2020 tax return?

Rodger owns 100 percent of the shares in Trevor Incorporated a C corporation. Assume the following for the current year: Given these assumptions, how much cash does Rodger have from the dividend after paying taxes on the distribution?

If a C corporation incurred a net operating loss in 2017, it could carry the loss back two years and forward 20 years to offset income in those years. However, it may offset only 80 percent of the taxable income before the NOL deduction in those years.

Sole proprietorships that are not organized as LLCs are not treated as legal entities separate from their individual owners.

S corporation shareholders who work for the S corporation receive compensation in the form of guaranteed payments.

Owners who work for entities taxed as a partnership receive guaranteed payments as compensation. The guaranteed payments are not self-employment income.

Which of the following statements is true for entity owners who pay the self-employment tax and the additional Medicare tax?

Tax rules require that entities be classified the same way for tax purposes as they are classified for legal purposes.

In certain circumstances, C corporation shareholders can elect to change theC corporation to a flow-through entity for tax purposes.

Which of the following statements is true regarding compensation paid to an owner of an entity taxed as a partnership who works for the entity?

An unincorporated entity with more than one owner is, by default, taxed as a partnership.

When an employee/shareholder receives a business income allocation from an S corporation, what taxes apply to the business income allocation?

In 2020, BYC Corporation (a C corporation) had an NOL carryover from 2017 in the amount of $40,000. How much tax will BYC pay in 2020 if it reports taxable income from operations of $35,000 in 2020 before the NOL deduction?

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Non-Liquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters