Question 1

Jorge is a 60 percent owner of JJ LLC (taxed as a partnership) . He is a passive investor in JJ (he doesn't perform any work for JJ)  and his marginal ordinary tax rate is 37 percent. Which of the following statements is True regarding Jorge's tax treatment of business income allocated to him from JJ?

Accepted Answer

A)   Business income allocations are not subject to self-employment tax.
B)   Business income allocations are not subject to the net investment income tax.
C)   Business income allocations are subject to the additional Medicare tax.
D)   Business income allocations are taxed at a maximum 23.8 percent tax rate.E) C) and D)
F) A) and D) A

Question 2

From a tax perspective, which entity choice is preferred when a liquidating distribution occurs and the entity has assets that have declined in value?

Accepted Answer

A)   Partnership.
B)   S corporation.
C)   LLC.
D)   Partnership and S corporation.
E)   S corporation and LLC.F) B) and E)
G) C) and D) B

Question 3

S corporations have more restrictive ownership requirements than other entities.

Accepted Answer

A) True 
 B)False

Question 4

Corporations are legally formed by filing articles of organization with the state in which the corporation will be created.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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

Accepted Answer

A) True 
 B)False

Question 7

A single-member LLC is taxed as a partnership.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following legal entities file documents with the state to be formally recognized by the state?

Accepted Answer

A)   Limited Liability Company.
B)   General Partnership.
C)   Sole Proprietorship (non LL
C)  .
D)   None of the choices are correct.E) C) and D)
F) B) and D)

Question 9

The C corporation tax rate is significantly lower than the top individual marginal tax rate.

Accepted Answer

A) True 
 B)False

Question 10

In its first year of existence, BYC Corporation (a C corporation) reported a loss for tax purposes of ($40,000). How much tax will BYC pay in year 2 if it reports taxable income from operations of $35,000 in year 2 before any loss carryovers?

Accepted Answer

None. BYC's loss in year 1 of ($40,000) ...

Question 11

Which of the following statements is True for a C corporation incurring a net operating loss (NOL)  for a tax year that begins in 2018?

Accepted Answer

A)   It may carry the NOL back two years and forward 20 years.
B)   It may not carry the NOL back to prior years but it may carry it forward 20 years.
C)   It may not carry the NOL back to prior years but it can carry the loss forward indefinitely.
D)   It may carry the loss back two years and carry the loss forward indefinitely.
E)   None of the choices are correct.F) All of the above
G) B) and E)

Question 12

On which form is income from a single member LLC with one corporate (C corporation)  owner reported?

Accepted Answer

A)   Form 1120 used by C corporations to report their income.
B)   Form 1120S used by S corporations to report their income.
C)   Form 1065 used by partnerships to report their income.
D)   Form 1040, Schedule C used by sole proprietorships to report their income.
E)   None of the choices are correct.F) C) and D)
G) B) and C)

Question 13

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)   Regular income tax.
E)   None of the choices are correct.F) A) and B)
G) A) and C) D

Question 14

General partnerships are legally formed by filing a partnership agreement with the state in which the partnership will be formed.

Accepted Answer

A) True 
 B)False

Question 15

Generally, which of the following flow-through entities can elect to be treated as a C corporation?

Accepted Answer

A)   Limited partnership.
B)   Limited Liability Company.
C)   General partnership.
D)   All of the choices are correct.E) A) and B)
F) A) and C)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

C corporations and S corporations are separate taxpaying entities that pay tax on their own income.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following entity characteristics are generally key drivers for small business owners in deciding which entity to choose?

Accepted Answer

A)   Rate at which income from entity will be taxed.
B)   Required accounting period.
C)   Liability protection.
D)   Rate at which income from entity will be taxed and required accounting period.
E)   Rate at which income from entity will be taxed and liability protection.F) B) and D)
G) B) and C)

Question 19

Which legal entity is correctly paired with the party that bears the ultimate responsibility for paying the legal entity's liabilities?

Accepted Answer

A)   LLC - LLC members.
B)   Corporation - Corporation.
C)   General Partnership - Partnership.
D)   Limited Partnership - General partner.
E)   Corporation - Corporation and Limited Partnership - General partner.F) C) and D)
G) None of the above

Question 20

For tax purposes, sole proprietorships pay sole proprietors guaranteed payments as compensation for their services.

Accepted Answer

A) True 
 B)False

Exam 4: Entities Overview

Correct Answer
verified
A

From a tax perspective, which entity choice is preferred when a liquidating distribution occurs and the entity has assets that have declined in value?

Correct Answer
verified
B

S corporations have more restrictive ownership requirements than other entities.

Correct Answer
verified

Corporations are legally formed by filing articles of organization with the state in which the corporation will be created.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

A single-member LLC is taxed as a partnership.

Correct Answer
verified

Which of the following legal entities file documents with the state to be formally recognized by the state?

Correct Answer
verified

The C corporation tax rate is significantly lower than the top individual marginal tax rate.

Correct Answer
verified

In its first year of existence, BYC Corporation (a C corporation) reported a loss for tax purposes of ($40,000). How much tax will BYC pay in year 2 if it reports taxable income from operations of $35,000 in year 2 before any loss carryovers?

Correct Answer
verified
None. BYC's loss in year 1 of ($40,000) ...
View Answer

Which of the following statements is True for a C corporation incurring a net operating loss (NOL) for a tax year that begins in 2018?

Correct Answer
verified

On which form is income from a single member LLC with one corporate (C corporation) owner reported?

Correct Answer
verified

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

Correct Answer
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D

General partnerships are legally formed by filing a partnership agreement with the state in which the partnership will be formed.

Correct Answer
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Generally, which of the following flow-through entities can elect to be treated as a C corporation?

Correct Answer
verified

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

Correct Answer
verified

C corporations and S corporations are separate taxpaying entities that pay tax on their own income.

Correct Answer
verified

Which of the following entity characteristics are generally key drivers for small business owners in deciding which entity to choose?

Correct Answer
verified

Which legal entity is correctly paired with the party that bears the ultimate responsibility for paying the legal entity's liabilities?

Correct Answer
verified

For tax purposes, sole proprietorships pay sole proprietors guaranteed payments as compensation for their services.

Correct Answer
verified

Exam 4: Entities Overview

Correct AnswerverifiedA

From a tax perspective, which entity choice is preferred when a liquidating distribution occurs and the entity has assets that have declined in value?

Correct AnswerverifiedB

S corporations have more restrictive ownership requirements than other entities.

Correct AnswerverifiedShow Answer

Corporations are legally formed by filing articles of organization with the state in which the corporation will be created.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A single-member LLC is taxed as a partnership.

Correct AnswerverifiedShow Answer

Which of the following legal entities file documents with the state to be formally recognized by the state?

Correct AnswerverifiedShow Answer

The C corporation tax rate is significantly lower than the top individual marginal tax rate.

Correct AnswerverifiedShow Answer

In its first year of existence, BYC Corporation (a C corporation) reported a loss for tax purposes of ($40,000). How much tax will BYC pay in year 2 if it reports taxable income from operations of $35,000 in year 2 before any loss carryovers?

Correct AnswerverifiedNone. BYC's loss in year 1 of ($40,000) ...View AnswerShow Answer

Which of the following statements is True for a C corporation incurring a net operating loss (NOL) for a tax year that begins in 2018?

Correct AnswerverifiedShow Answer

On which form is income from a single member LLC with one corporate (C corporation) owner reported?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedD

General partnerships are legally formed by filing a partnership agreement with the state in which the partnership will be formed.

Correct AnswerverifiedShow Answer

Generally, which of the following flow-through entities can elect to be treated as a C corporation?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

C corporations and S corporations are separate taxpaying entities that pay tax on their own income.

Correct AnswerverifiedShow Answer

Which of the following entity characteristics are generally key drivers for small business owners in deciding which entity to choose?

Correct AnswerverifiedShow Answer

Which legal entity is correctly paired with the party that bears the ultimate responsibility for paying the legal entity's liabilities?

Correct AnswerverifiedShow Answer

For tax purposes, sole proprietorships pay sole proprietors guaranteed payments as compensation for their services.

Correct AnswerverifiedShow Answer

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A

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B

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None. BYC's loss in year 1 of ($40,000) ...
View Answer

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D

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