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MCQ-Corresponds to CLO 7(a) Who pays tax on the income of an S corporation?....




Question;Corresponds to CLO 7(a);Who pays tax on the income of an S corporation?;The S corporation;The shareholders;The customers;There is no tax imposed on S;corporation income;Question 2;Corresponds to CLO 7(b);To become an S corporation, a corporation must;have;once been a C corporation.;elect to be treated as such.;have;at least 100 shareholders.;Only c;and b.;All of;the above.;Question 3;Corresponds to CLO 5(a);Which of the following corporations is an includible corporation for purposes;of filing a consolidated tax return?;insurance;companies;S;corporations;car manufacturing corporation;foreign;corporations;Question 4;Corresponds to CLO 9(b);Tammie contributes $50,000 cash in exchange for a 25% interest in the profi ts;and capital of the XYZ Partnership. The partnership has $300,000 of recourse;debt and $100,000 of nonqualifi ed nonrecourse debt. The partnership has a loss;of $800,000 for the year. How much of the loss will Tammie be able to deduct;assuming she is allocated 25% of the liabilities and the partnership is not a;passive activity?;$0.;$50,000.;$125,000.;$150,000.;$200,000;Question 5;Corresponds to CLO 7(d);A calendar year corporation wishes to elect to be taxed as an S corporation.;What is the last day that the corporation can file an election to be effective;for 2011?;December;31, 2010.;March 15, 2011.;April;15, 2011.;December;31, 2011.;Question 6;Corresponds to CLO 7(b);S corporation will be treated as having one class of stock if;all of its outstanding shares of stock confer identical;rights to distribution and liquidation proceeds.;there;is no differences in voting rights.;there;is no differences in the timing of distributions.;All of;the above;Question 7;Corresponds to CLO 5(b);Cardinal and Bluebird Corporations both use a calendar year as their tax year.;At the close of business on June 30, Cardinal Corporation buys all of Bluebird;Corporation's stock. If the two corporations file a consolidated return and;both corporations earn their income evenly throughout the year, what portion of;Cardinal's income will be included in the consolidated return? (Assume all months;have 30 days.);100%;50%;0%;none;of the above;Question 8;Corresponds to CLO 3(b);Rachael and Ray form an equal partnership, R&R, on January 1, 20X1. Rachael;contributes $100,000 in exchange for her one-half interest, Ray contributes land worth $100,000.Ray's adjusted basis;in the land is $30,000. Which of the following statements is accurate with;respect to this exchange?;Neither Rachael, Ray, nor R&R recognize any gain or;loss on the transfer.;Ray;recognizes $70,000 gain on the transfer.;R&R;recognizes $70,000 gain on the transfer.;b. and;c.;Question 9;Corresponds to CLO 1(d);Which of the following entities may select any tax period (calendar or fiscal)?;sole;partnership;partnership;S corporations;trusts;corporations other than S corporations.;Question 10;Corresponds to CLO 2(c);Comic Books Corporation, a calendar year corporation, had a net operating loss;of $50,000 for 2011. Comic Books made a proper election to forgo the carryback;period. For 2012, Comic Books correctly deducted $40,000 of the 2011 loss.;Comic Books will lose the remaining $10,000 if it cannot be deducted by the end;of which tax year?;2018;2021;2026;2031;Question 11;Corresponds to CLO 6(a);Tugboats Corporation, a calendar year corporation that began doing business on;January 1, 2005, had $35,000 in accumulated earnings and profits on January 1;2011. Tugboats had an operating loss of $60,000 for the fi rst six months of;2011, but had $10,000 in earnings for the entire year. Tugboats made a;distribution of $25,000 cash to its stockholders on April 1, 2011. What is the;amount of Tugboat's accumulated earnings and profits on January 1, 2012?;$0;$10,000;$20,000;$45,000;Question 12;Corresponds to CLO 3(b);Rachael and Ray form an equal partnership, R&R, on January 1, 20X1. Rachael;contributes $100,000 in exchange for her one-half interest, Ray contributes;land worth $170,000, which is subject to a $70,000 debt, which R&R assumes.;Ray's adjusted basis in the land is $30,000. Which of the following statements;is accurate with respect to this exchange?;Ray;does not recognize any gain or loss on the exchange and his tax basis in;R&R is $30,000.;Ray;does not recognize gain on the exchange and his tax basis in R&R is;$100,000.;*. Ray recognizes $5,000 gain on the exchange and his;tax basis in R&R is $0.;d. Ray recognizes $70,000 gain on the exchange and his tax basis in R&R;is $100,000.;Question 13;Corresponds to CLO 8(a);Which of the following would not increase the basis of a shareholder's stock in;an S corporation;All;separately stated income items of the S corporation, including tax- exempt;income.;Any;non=separately stated income of the S corporation.;Capital gains tax paid by the shareholder.;The;amount of deductions for depletion that is more than the basis of the;property being depleted.;Question 14;Corresponds to CLO 1(a);Which of the following is an advantage of a sole proprietorship over other;business forms?;tax-exempt;treatment of fringe benefits;the;deduction for compensation paid to the owner;low;tax rates on dividends;ease of formation;Question 15;Corresponds to CLO 9(c);Krause Corporation makes an S election, believing that it has no current or;accumulated E&P. However, after an IRS audit, Krause is found to have;failed the passive investment income test for three consecutive years and also;to have a Subchapter C E&P balance from its three pre-election tax years.;The IRS will;automatically;terminate the election and Krause cannot reelect for a 5-year time period.;retroactively;revoke the election to the first day on which it was effective and Krause;will not be able to reelect.;treat;the error as such and allow the election to continue unbroken.;likely treat the termination as inadvertent and will;probably approve a continued S election if the corporation distributes the;Subchapter C E&P.;Question 16;Corresponds to CLO 1(c);The following entities are not subject to double taxation except;partnership;sole;proprietorship;C corporation;S;corporation;all;are subject to double taxation;none;are subject to double taxation;Question 17;Corresponds to CLO 8(c);An S corporation incurs an operating loss of $80,000 in 20X5 and makes no;distributions to its shareholders during the year. Before considering the;current year operating loss, Abe, a shareholder that owns 50 percent of the S;corporation stock, has a basis in his shares of S corporation stock of $30,000;and a $20,000 basis in a note from the corporation. How much of the $80,000;loss can he deduct on his 20X5 individual tax return?;$0.;$20,000.;$30,000.;$40,000.;Question 18;Corresponds to CLO 2(b);Can Co.'s gross income from operations was $1,000,000 and its expenses from;operations were $1,500,000. It also received a $600,000 dividend from a;10%-owned corporation. What is Can Co.'s dividends-received deduction?;$0;$70,000;$320,000;$420,000;Question 19;Corresponds to CLO 4(b);Ellen is a 25 percent partner in Heartland Partners. Her tax basis in her;partnership interest is $18,000. She received a non-liquidating distribution of;land with a tax basis of $23,000 and a fair market value of $45,000. The;partnership has no liabilities. What will be Ellen's tax basis in the land;received in the non-liquidating distribution?;$18,000;$23,000;$45,000;zero;none;of the above;Question 20;Corresponds to CLO 9(b);Phil Justin and Mark Tyme are equal partners in the Justin Tyme partership. On;December 15, 2010, Phil Justin transferred land with a fair market value of;$100,000 to the Justin Tyme partnership. Phil had a basis in the land of $70,000.;On June 1, 2011, Phil withdrew cash of $50,000 from the Justin Tyme;partnership. An IRS agent is currently reviewing Phil's 2010 and 2011 income;tax returns.;Phil;should not be concerned because the contribution was a nontaxable event under;section 721 and the distribution is tax free since he has sufficient basis in;the partnership.;The IRS agent will likely assert that the transaction;was a disguised sale and that Phil should have reported $15,000 gain on the;sale.;The;IRS agent will be unable to assert the transaction was a disguised sale since;the transfer of the land and the distribution of the cash were in different;years.;The;IRS agent will be unable to assert the transaction was a disguised sale since;these rules do not apply to a partnership and a 50 percent or more partner;Question 21;Corresponds to CLO 6(b);A tract of land is distributed to Martha Moore as a dividend. Its basis;immediately prior to the distribution was $40,000, its value is $80,000, and it;is subject to a mortgage of $55,000. The following statements concerning the;distribution are all false except;E&P;is increased by $15,000 (liability less basis), decreased by $40,000 and;increased by the liability.;The;net adjustment to the E&P account is $40,000, the amount of the realized;gain.;The;distributing corporation's realized gain of $40,000 is recognized to the;extent of the $15,000.;The shareholder's basis in the land is $80,000, its;fair market value.;Question 22;Corresponds to CLO 5(c);Blue and Gold Corporations are members of the Blue-Gold affiliated group, which;filed a consolidated tax return for last year, reporting a $200,000;consolidated NOL. Small taxable income amounts were reported by Blue and Gold;in separate tax returns filed in years prior to last year. Early in the current;year, 100% of Blue's stock is purchased by Robert Martin who contributes;additional funds to Blue Corporation sufficient to acquire all of Green;Corporation's stock. For the current year, the affiliated group reports the;following results (excluding the consolidated NOL deduction);Blue Corp Taxable Income = $150,000, Gold Taxable Income = $(25,000), Green;(since acquisition) Taxable Income = $100,000.;Which of the following statements is correct?;Last;year's NOL cannot be carried back.;The;portion of last year's NOL that is not used as a carryback can be carried;over the current year but is only used against Blue's taxable income.;The portion of last year's NOL that is not used as a;carryback can be carried over against the current consolidated taxable;income, but is subject to the Sec. 382 limitation.;The;portion of last year's NOL that is not used as a carryback can be carried;over, but is used only against the Blue's and Gold's taxable income.;Question 23;Corresponds to CLO 4(a);Ten years ago, Lisa Bara acquired a one-third interest in Dee Associates, a;partnership. This year, when Lisa's entire interest in the partnership was;liquidated, Dee's assets consisted of the following: cash, $20,000, tangible;property with a basis of $46,000, and a fair market value of $40,000. Dee had;no liabilities. Lisa's adjusted basis for her one-third interest was $22,000.;Lisa received cash of $20,000 in complete liquidation of her entire interest.;How much loss will Lisa recognize upon receipt of the liquidating distribution?;$0;$2,000;short-term capital loss;$2,000 long-term capital loss;$2,000;ordinary loss;Question 24;Corresponds to CLO 1(b);When comparing corporate and individual taxation the following statements are true;except;Individuals;have exemptions and a standard deduction, corporations do not.;Both;types of taxpayers have percentage limitations on the charitable contribution;deduction, coupled;with a carryover of the excess contribution.;All taxpayers;may carry net operating losses back two years, forward 20.;Both corporate and individual taxpayers may have a;long-term capital loss carry-forward.;Question 25;Corresponds to CLO 3(a);Which of the following do not decrease a partner's basis in the partnership;interest?;A;decrease in the partner's share of partnership liabilities.;A;distribution made by the partnership to the partner.;The;partner's distributive share of nondeductible items that are not capital in;nature.;The partner's;distributive share of partnership losses.;All of the above decrease a partner's basis in the;partnership interest.;Question 26;Corresponds to CLO 9(c);A C corporation was formed five years ago and is a fiscal-year taxpayer with a;June 30 year-end. The C corporation wants to make an S election for its tax;year beginning in the current year. The election must be made by;(assuming permission can be obtained to continue using the fiscal year from the;IRS).;June;30 of the current year;September 15 of the current year;June;30 of the next year;September;15 of the next year;Question 27;Corresponds to CLO 4(a);Martin has a tax basis in his one-fi fth interest in Gateway Partners of;$45,000. The partnership has no liabilities and no hot assets. Martin receives;a distribution of $33,000 cash in complete liquidation of his interest in the;partnership. How much gain or loss will Martin recognize on receipt of the;liquidating cash distribution?;zero;$33,000;gain;($12,000) loss;$12,000;gain;none;of the above;Question 28;Corresponds to CLO 3(c);The AB general partnership agreement provides for guaranteed payments for services;rendered of $50,000 and $80,000 for Andrew and Brenda, respectively. The;services rendered are of a nature that the amount is deductible by AB in;computing its ordinary income. After the guaranteed payments are deducted, the;partnership agreement calls for sharing of profits and losses as follows;Andrew 45 percent, Brenda 55 percent. If AB's ordinary income before taking the;guaranteed payments into consideration is $200,000, what amount of total;ordinary income from the partnership should each partner report on his or her;individual income tax return?;Andrew $81,500, Brenda $118,500.;Andrew;$69,500, Brenda $130,500.;Andrew;$50,000, Brenda $80,000.;Andrew;$140,000, Brenda $190,000.;Andrew;$119,500, Brenda $210,500.;Question 29;Corresponds to CLO 2(c);The following statements about the corporate income tax computation are all;false, except;Corporations;are subject to a fl at 34 percent tax on net capital gains, including net;Code Sec. 1231 gains.;The corporate tax rate on a long-term capital gain may;be as low as 15 percent.;A;corporation is subject to a 39 percent tax on all taxable income in excess of;$100,000.;The;AMT can never apply to personal service corporations taxed at a fl at 34;percent.;Question 30;Corresponds to CLO 8(d);On January 1, 20X6, an S corporation has accumulated E&P of $55,000 from;its years as a C corporation and has a positive AAA balance of $15,000. The;corporation's sole shareholder, Betty, has a basis in her S corporation stock;of $30,000. During 20X6, the corporation reports ordinary income of $10,000 and;a $20,000 long-term capital gain. During 20X6, the corporation distributes;$65,000 to Betty. The amount of the distribution that represents a taxable;dividend is;$0.;$20,000.;$50,000.;$55,000.;Question 31;Corresponds to CLO 6(c);In 2011, pursuant to a plan of complete liquidation, Woods Corp. distributed;all of its property to its shareholders. Among the property distributed was;cash of $200,000, and land that had been held as an investment that had a basis;of $100,000, and a fair market value of $160,000. The land was subject to a;mortgage of $170,000 which the shareholders assumed. What amount of gain must;Woods Corp. recognize as a result of its liquidating distributions?;$0;$10,000;$60,000;$70,000;Question 32;Corresponds to CLO 5(b);Ajak Corporation owns 85% of the single class of Utech Corporation stock. Utech;Corporation owns 35% of Tech Corporation. Ajak Corporation also owns 50% of;Tech Corporation, and Tech Corporation owns 75% of Baxter Corporation.;Ajak, Tech, Utech, and Baxter Corporations are an;affiliated group.;Ajak;Tech, and Baxter Corporations are an affiliated group.;Ajak;Tech, and Utech Corporations are an affiliated group.;None;of the above are correct.;Question 33;Corresponds to CLO 3(c);The partnership of Bond and Felton has been permitted to retain its fiscal year;ending March 31. John Bond files his tax return on a calendar year basis. The;partnership paid Bond a guaranteed salary of $1,000 per month during the;calendar year 2010 and $1,500 per month during the calendar year 2011. After;deducting this salary the partnership realized ordinary income of $80,000 for the;year ended March 31, 2011, and $90,000 for the year ended March 31, 2012.;Bond's share of the profits is the salary paid to him plus 40 percent of the;ordinary income after deducting his salary. For 2011, what amount should Bond;report as his taxable income from the partnership?;$36,500;$44,000;$45,500;$50,0;Question 34;Corresponds to CLO 3(d);Bob Barker contributed a building with an adjusted basis to Bob of $50,000 and;a fair market value of $150,000 subject to a mortgage of $120,000 in exchange;for a 30 percent interest in the Alpha Partnership. Alpha will assume the;mortgage on the building. What is Alpha's basis in the building?;$0;$30,000;$50,000;$84,000;Question 35;Corresponds to CLO 5(c);The Alto-Baxter affiliated group filed a consolidated return for the first time;last year. The group does not come under the "large" corporation;rules. For last year, the group reports a tax liability of $60,000. Cooper;Corporation has a $30,000 tax liability last year. This year, the Alto-Baxter;affiliated group purchased all of the Cooper stock. This year, the;Alto-Baxter-Cooper group reports an $110,000 consolidated tax liability. To;avoid penalties for the current year, the group must make timely estimated tax;payments of how much during the year?;$60,000;$90,000;$110,000;No;estimated tax payments are required.;Question 36;Corresponds to CLO 2(a);Hoover, Inc. had gross receipts from operations of $230,000, operating and;other expenses of $310,000, and dividends received from a 45 percent-owned;domestic corporation of $120,000. Hoover's tax position for the year is;$8,000;taxable income;$56,000 net operating loss;$40,000;taxable income;$80,000;net operating loss


Paper#51937 | Written in 18-Jul-2015

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