Hay, Straw and Clover formed the HSC Partnership, agreeing to share profits and losses equally. Clover will manage the business for which he will receive a guaranteed payment of $30,000 per year. Cash receipts and disbursements for the year were as follows: \[\begin{array} { l r } \text { Net income from operations (before guaranteed payment) } & \mathbf { \$ 9 0 , 0 0 0 } \\ \text { Guaranteed payment to Clover } & \mathbf { 3 0 , 0 0 0 } \end{array}\] What is Clover's share of the partnership's ordinary income and guaranteed payment?

A) Ordinary income, $30,000; Guaranteed payment, $10,000 B) Ordinary income, $20,000; Guaranteed payment, $10,000 C) Ordinary income, $30,000; Guaranteed payment, $30,000 D) Ordinary income, $20,000; Guaranteed payment, $30,000 A) Ordinary income, $30,000; Guaranteed payment, $10,000 B) Ordinary income, $20,000; Guaranteed payment, $10,000 C) Ordinary income, $30,000; Guaranteed payment, $30,000 D) Ordinary income, $20,000; Guaranteed payment, $30,000

Aaron James has a qualifying home office. The office is 500 square feet and the entire house is 2,500 square feet. Use the following information to determine his allowable home office deduction: \[\begin{array} { | l | r | } \hline \begin{array} { l } \text { Net income from self-employment before } \\ \text { home office deduction } \end{array} & \$ 150,000 \\ \hline \text { Expenses from home } ( 100 \% ) &\\ \hline \text { Home mortgage interest } & 12,000 \\ \hline \text { Property taxes } & 4,000 \\ \hline \text { Homeowner's insurance } & 2,500 \\ \hline \text { Utilities } & 2,200\\ \hline \text { Depreciation on office portion of home } & 1,100 \\ \hline \end{array}\]

A) $5,240 B) $4,140 C) $4,260 D) $21,800 A) $5,240 B) $4,140 C) $4,260 D) $21,800

Rebecca has a qualifying home office. The room is 600 square feet and the entire house is 3,000 square feet. Use the following information to determine her allowable home office deduction: \[\begin{array} { | l | r | } \hline \text { Revenue from legal practice } & \$ 160,500 \\ \hline \text { Expenses from legal practice } & 157,000 \\ \hline \text { Expenses from home } ( 100 \% ) & \\ \hline \text { Home mortgage interest } & 10,000 \\ \hline \text { Property taxes } & 3,300 \\ \hline \text { Homeowner's insurance } & 2,000 \\ \hline \text { Utilities } & 1,200 \\ \hline \text { Costs to convert patio into a sunroom } & 5,000 \\ \hline \text { Depreciation on office portion of home } & 800 \\ \hline \end{array}\]

A) $3,300 home office deduction B) $16,500 home office deduction C) $3,500 home office deduction D) $4,100 home office deduction A) $3,300 home office deduction B) $16,500 home office deduction C) $3,500 home office deduction D) $4,100 home office deduction

Exam 10: Sole Proprietorships, Partnerships, Llcs, and S Corporations

XYZ, Inc. wishes to make an election to become an S corporation for federal tax purposes. Which of the following statements regarding the election is false?

(Multiple Choice)

4.8/5

(86)

Question 41

During 2016, Scott Howell received a salary of $125,000. The social security base amount for 2016 was $118,500. How much payroll tax should have been withheld from Scott's salary for 2016?

(Multiple Choice)

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(81)

Question 42

Which of the following statements regarding sole proprietorships is false?

(Multiple Choice)

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(92)

Question 43

A partner's distributive share of partnership nondeductible expenses does not decrease his or her tax basis in the partnership interest.

(True/False)

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(75)

Question 44

Hay, Straw and Clover formed the HSC Partnership, agreeing to share profits and losses equally. Clover will manage the business for which he will receive a guaranteed payment of $30,000 per year. Cash receipts and disbursements for the year were as follows: Net income from operations (before guaranteed payment) Guaranteed payment to Clover What is Clover's share of the partnership's ordinary income and guaranteed payment?

(Multiple Choice)

4.8/5

(81)

Question 45

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. Assuming that Alice's marginal tax rate is 39.6%, calculate her after-tax cash flow from the partnership this year.

(Multiple Choice)

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(86)

Question 46

If a business is formed as an S corporation, its income may be subject to double taxation.

(True/False)

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(71)

Question 47

Corporations cannot be shareholders in an S corporation.

(True/False)

4.8/5

(78)

Question 48

Aaron James has a qualifying home office. The office is 500 square feet and the entire house is 2,500 square feet. Use the following information to determine his allowable home office deduction: Net income from self-employment before home office deduction \ 150,000 Expenses from home (100\%) Home mortgage interest 12,000 Property taxes 4,000 Homeowner's insurance 2,500 Utilities 2,200 Depreciation on office portion of home 1,100

(Multiple Choice)

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(72)

Question 49

Sue's 2016 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?

(Multiple Choice)

4.8/5

(77)

Question 50

Loretta is the sole shareholder of Country Collectibles, a calendar year S corporation. Although Loretta spends at least 40 hours per week supervising Country Collectible's employees, she has never drawn a salary from the business. Country Collectibles has been in existence for five years and has earned a profit every year. Loretta withdraws $100,000 cash from the S corporation each year. As a result of an audit, the IRS asserts that $75,000 of the cash withdrawal should be considered a salary payment to Loretta. What are the payroll tax consequences of this recharacterization?

(Multiple Choice)

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(94)

Question 51

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

(Multiple Choice)

4.8/5

(83)

Question 52

During the current year, Margie earned wage income of $300,000. If Margie is single, which of the following statements regarding her Medicare tax liability is true?

(Multiple Choice)

4.8/5

(86)

Question 53

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

(True/False)

4.7/5

(83)

Question 54

A partner's tax basis in his or her partnership interest is decreased by partnership distributions.

(True/False)

4.8/5

(75)

Question 55

Matthew earned $150,000 in wages during 2016. FICA taxes withheld by his employer would have been $11,475.

(True/False)

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(82)

Question 56

William is a member of an LLC. His Schedule K-1 reported a $1,200 share of capital loss and a $3,000 share of Section 1231 gain. William recognized a $4,500 capital gain on the sale of marketable securities and a $15,000 Section 1231 loss on the sale of business equipment. What is the net effect of these gains and losses on William's taxable income?

(Multiple Choice)

4.8/5

(85)

Question 57

Debbie is a limited partner in ADK Partnership. Her partnership Schedule K-1 reports $19,000 ordinary business income, $2,000 long-term capital gain, and $830 dividend income. Which of these items are subject to self-employment tax?

(Multiple Choice)

4.7/5

(72)

Question 58

Rebecca has a qualifying home office. The room is 600 square feet and the entire house is 3,000 square feet. Use the following information to determine her allowable home office deduction: Revenue from legal practice \ 160,500 Expenses from legal practice 157,000 Expenses from home (100\%) Home mortgage interest 10,000 Property taxes 3,300 Homeowner's insurance 2,000 Utilities 1,200 Costs to convert patio into a sunroom 5,000 Depreciation on office portion of home 800

(Multiple Choice)

4.8/5

(94)

Question 59

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.

(True/False)

5.0/5

(70)

Question 60

Showing 41 - 60 of 97

XYZ, Inc. wishes to make an election to become an S corporation for federal tax purposes. Which of the following statements regarding the election is false?

During 2016, Scott Howell received a salary of $125,000. The social security base amount for 2016 was $118,500. How much payroll tax should have been withheld from Scott's salary for 2016?

Which of the following statements regarding sole proprietorships is false?

A partner's distributive share of partnership nondeductible expenses does not decrease his or her tax basis in the partnership interest.

If a business is formed as an S corporation, its income may be subject to double taxation.

Corporations cannot be shareholders in an S corporation.

Sue's 2016 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?

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

During the current year, Margie earned wage income of $300,000. If Margie is single, which of the following statements regarding her Medicare tax liability is true?

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

A partner's tax basis in his or her partnership interest is decreased by partnership distributions.

Matthew earned $150,000 in wages during 2016. FICA taxes withheld by his employer would have been $11,475.

Debbie is a limited partner in ADK Partnership. Her partnership Schedule K-1 reports $19,000 ordinary business income, $2,000 long-term capital gain, and $830 dividend income. Which of these items are subject to self-employment tax?

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.

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

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