Question;ACC 455 final Exam;1);Which of the following statements;regarding proposed regulations is not correct?;A. Proposed and temporary regulations are generally issued;simultaneously.;B. Proposed regulations do not provide any insight into the IRS's interpretation;of the tax law.;C. Proposed regulations expire after 3 years.;D. Practitioners and other interested parties may comment on proposed;regulations.;2) Regulations are;A. presumed to be valid and to have almost the same weight as the IRC;B. equal in authority to legislation if interpretative;C. equal in authority to legislation;D. equal in authority to legislation if statutory;3) Which of the following courts is not;a trial court for tax cases?;A. U.S. Tax Court;B. U.S. Court of Federal Claims;C. U.S. Bankruptcy Court;D. U.S. District Court;4) Which of the following statements is;incorrect?;A. Limited partners' liability for partnership debt is limited to their;amount of investment.;B. In a general partnership, all partners have unlimited liability for;partnership debts.;C. In a limited partnership, all partners participate in managerial;decision-making.;D. All of the statements are correct.;5) Which of the following is an advantage of a sole proprietorship over other;business forms?;A. Low tax rates on dividends;B. Ease of formation;C. Tax-exempt treatment of fringe benefits;D. The deduction for compensation paid to the owner;6) Which of the following statements is correct?;A. S shareholders are taxed on their proportionate share of earnings that;are distributed.;B. S shareholders are taxed on their proportionate share of earnings;whether or not distributed.;C. An owner of a C corporation is taxed on his or her proportionate share;of earnings.;D. S shareholders are only taxed on distributions.;7) Three members form an LLC in the current year. Which of the following;statements is incorrect?;A. The LLC can elect to be taxed as a C corporation with no special tax;consequences.;B. If the LLC elects to use its default classification, it can elect to;change its status to being taxed as a C corporation beginning with the third;tax year after the initial classification.;C. The LLC's default classification under the check-the-box rules is as a;partnership.;D. The LLC can elect to have its default classification ignored.;8) Identify which of the following statements is true.;A. Under the check-the-box regulations, an LLC that has one member;(owner) may be disregarded as an entity separate from its owner.;B. An unincorporated business may not be taxed as a corporation.;C. A new LLC that is owned by four members elects to be taxed under its;default classification (as a partnership) in its first year of operations. The;entity is prohibited from changing its tax classification at any time in the;future.;D. All are false.;9) Identify which of the following statements is true.;A. The check-the-box regulations permit an LLC to be taxed as a C;corporation.;B. Under the check-the-box regulations, an LLC that has only two members;(owners) default classification is as a partnership.;C. Once an election is made to change its classification, an entity;cannot change again for 60 months.;D. All of the statements are true.;10) Rose and Wayne form a new corporation. Rose contributes cash for 85% of the;stock and Wayne contributes services for 15% of the stock. The tax effect;is;A. Rose and Wayne are not required to recognize their realized gains.;B. Wayne must report the FMV of the stock received as capital gain.;C. Rose and Wayne must recognize their realized gains, if any.;D. Wayne must report the FMV of the stock received as ordinary income.;11) Matt and Sheila form Krupp Corporation. Matt contributes property with a;FMV of $55,000 and a basis of $35,000. Sheila contributes property with a FMV;of $75,000 and a basis of $40,000. Matt sells his stock to Paul shortly after;the exchange. The transaction will;A. qualify with respect to Sheila under Sec. 351 whether Matt qualifies;or not;B. qualify under Sec. 351 if Matt can show the sale to Paul was not part;of a prearranged plan;C. not qualify under Sec. 351;D. qualify under Sec. 351 only if an advance ruling has been obtained;12) For Sec. 351 purposes the term property does not include;13) Identify which of the following statements is true.;14) A new corporation may generally select one of the following accounting;methods with the exception of;15) Identify which of the following statements is false.;16) Edison Corporation is organized on July 31. The corporation starts business;on August 10. The corporation adopts a November 30 fiscal year end. The;following expenses are incurred during the year: Date;Type Amount;What is the maximum amount of organizational expenditures that can be deducted;by the corporation for its first tax year ending November 30?;17) Maxwell Corporation reports the following results;Gross income from operations $ 90,000;Dividends received from 18%-owned domestic corporation 70,000;Expenses 100,000;18) Island Corporation has the following income and expense items for the;year.;Gross receipts from sales $60,000;Dividends received from 15%-owned domestic corporation 40,000;Expenses connected with sales 30,000;The taxable income of Island Corporation is;19) Which of the following is not an adjustment in calculating AMTI?;20) Tax-exempt interest income on state and local municipal bonds which are not;a private activity is;21) Which of the following statements about the alternative minimum tax;depreciation rules is correct?;22) Maxwell Corporation reports the following results;Year Current E&P Distributions;2005 $6,000 $4,000;2006 5,000 1,000;2007 1,000 -0-;23);Grant Corporation sells land (a no inventory item) with a basis of $57,000 for;$100,000. Nichole will be paid on an installment basis in five equal annual;payments starting in the current year. The E&P for the year of sale will be;increased as a result of the sale (excluding federal income taxes) by;24) Identify which of the following statements is false.;25) Identify which of the following statements is true.;26) Identify which of the following statements is true.;27) For purposes of determining current E&P, which of the following items;cannot be deducted in the year incurred?;28) A corporation distributes land and the related liability to Meg, its sole;shareholder. The land has a FMV of $60,000 and is subject to a liability of;$70,000. The corporation has current and accumulated E&P of $80,000. The;corporation's adjusted basis for the property is $70,000. What effect does the;transaction have on the corporation?;29) Hogg Corporation distributes $30,000 to its sole shareholder, Ima. At the;time of the distribution, Hoggs' E&P is $14,000 and Ima's basis in her;stock is $10,000. Ima's gain from this transaction is;30) One consequence of a property distribution by a corporation to a;shareholder is;31) Which of the following is not a reason for a stock redemption?;32) Elijah owns 20% of Park Corporation's single class of stock. Elijah's basis;in the stock is $8,000. Park's E&P is $28,000. If Park redeems all of;Elijah's stock for $48,000, Elijah must report dividend income of;33) Which of the following is not a condition that permits a stock redemption;to be treated as a sale?;34) Identify which of the following statements is true.;35) Identify which of the following statements is true.;36);The definition of a partnership does not include;37);Which of the following items is not separately stated for an S;corporation?;38) Cactus Corporation, an S Corporation, had accumulated earnings and profits;of $100,000 at the beginning of 2008. Tex and Shirley each own 50% of the;stock. Cactus does not make any distributions during 2008, but had $200,000 of;ordinary income. In 2009, ordinary income was $100,000 and distributions were;$100,000. What is Tex's ordinary income for 2008?;39) Cactus Corporation, an S Corporation, had accumulated earnings and profits;of $100,000 at the beginning of 2008. Tex and Shirley each own 50% of the stock.;Cactus does not make any distributions during 2008, but had $200,000 of;ordinary income. In 2009, ordinary income was $100,000 and distributions were;$100,000. What is Tex's ordinary income for 2009?;40) On January 1, Helmut pays $2,000 for a 10% capital, profits and loss;interest in a partnership, which has recourse liabilities of $20,000. The;partners share economic risk of loss from recourse liabilities in the same way;they share partnership losses. In the same year, the partnership incurs losses;of $6,000 and the recourse liabilities increase by $5,000. Helmut and the;partnership use a calendar tax year-end. Helmut's basis at year-end is;41) On January 2 of the current year, Calloway and Taylor contribute cash;equally to form the CT Partnership. Calloway and Taylor share profits and;losses in a ratio of 75% and 25%, respectively. The partnership's ordinary;income for the year was $40,000. Calloway received a distribution of $5,000;during the year. What is Calloway's share of taxable income for the year?;42) On the first day of the partnership's tax year, Karen purchases a 50%;interest in a general partnership for $30,000 cash and she materially;participates in the operation of the partnership for the entire year. The;partnership has $40,000 in recourse liabilities when Karen enters the;partnership. Partners share the economic risk of loss from recourse liabilities;in the same way they share partnership losses. There is no minimum gain related;to the nonrecourse liability. During the year the partnership incurs a $120,000;loss and a $20,000 increase in liabilities. How much of the loss can Karen;report on her tax return for the current year?;43) The total bases of all distributed property in the partner's hands;following a nonliquidating distribution is limited to;44) The Internal Revenue Code includes which of the following assets in the;definition of Sec. 751 properties?;45) Identify which of the following statements is true.;46) Which of the following conditions will not cause an S election to be;terminated?;47) Identify which of the following statements is true.;48) Identify which of the following statements is false.
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