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Question;1394. TF #1;A business entity is not always taxed the same way as its legal form.;a.;True;b. False;1395. TF #2;A business organized as a C corporation will always encounter lower tax rates;than a business organized as a sole proprietorship or as a partnership.;a.;True;b. False;1396. TF #3;The check-the-box Regulations have made it easier for a business entity to be;classified as a partnership for Federal income tax purposes.;a.;True;b. False;1397. TF #4;A limited liability company (LLC) is a hybrid business form that combines the;corporate characteristic of limited liability for the owners with the tax;characteristics of a partnership.;a.;True;b. False;1398. TF #5;A limited liability company (LLC) can elect under the check-the-box rules to be;taxed as an S corporation.;a.;True;b. False;1399. TF #6;Depending on the election made under the check-the-box provisions, a limited;liability company (LLC) with two or more owners might have to file a Form 1065;or a Form 1120.;a.;True;b. False;1400. TF #7;Each of the following can pass profits and losses through to the owners;general partnership, limited partnership, S corporation, and limited liability;company.;a.;True;b. False;1401. TF #8;Nontax factors are less important than tax factors in making a business;decision.;a.;True;b. False;1402. TF #9;The ? 465 at-risk provision and the ? 469 passive activity loss provision have;decreased the tax attractiveness of investments in real estate for partnerships;and for limited liability companies.;a.;True;b. False;1403. TF #10;A C corporation offers greater flexibility in terms of the types of owners and;capital structure than an S corporation.;a.;True;b. False;1404. TF #11;An S corporation has a lesser degree of limited liability than a C corporation.;a.;True;b. False;1405. TF #12;A limited partner in a limited partnership has limited liability whereas a;general partner in a limited partnership has unlimited liability unless the;limited partners agree that the general partner will have limited liability.;a.;True;b. False;1406. TF #13;A limited partnership can indirectly avoid unlimited liability of the general;partner if the general partner is a corporation.;a.;True;b. False;1407. TF #14;C corporations and their shareholders are subject to double taxation. S;corporations and their shareholders typically are subject to single taxation.;Therefore, for any given amount of corporate taxable income, the combined tax;liability of a C corporation and its shareholders will exceed that of an S;corporation and its shareholders.;a.;True;b. False;1408. TF #15;Lime, Inc., has taxable income of $330,000. If Lime is a C corporation, its tax;liability must be either $111,950 [($50,000 ? 15%) + ($25,000 ? 25%) + ($25,000;? 34%) + ($230,000 ? 39%)] or $115,500.;a.;True;b. False;1409. TF #16;A major benefit of the S corporation election is the general avoidance of double;taxation.;a.;True;b. False;1410. TF #17;Obtaining a deduction on payments made by a C corporation to shareholders is a;technique for reducing double taxation.;a.;True;b. False;1411. TF #18;A corporation may alternate between S corporation and C corporation status each;year, depending on which results in more tax savings.;a.;True;b. False;1412. TF #19;If a C corporation has earnings and profits at least equal to the amount of a;distribution, the tax consequences to the shareholders are the same, regardless;of whether the distribution is classified as a dividend or as a stock redemption.;a.;True;b. False;1413. TF #20;When a C corporation is classified as a small corporation for AMT purposes;both the corporation and its shareholders are exempt from the AMT.;a.;True;b. False;1414. TF #21;An S corporation is notsubject to;the AMT, but its shareholders are in that the S corporation?s AMT adjustments;and preferences are passed through to them.;a.;True;b. False;1415. TF #22;The AMT statutory rate for C corporations and for S corporation shareholders on;the AMT base is 20%.;a.;True;b. False;1416. TF #23;The AMT tax rate for a C corporation is less than the regular tax rate for C;corporations.;a.;True;b. False;1417. TF #24;C corporations and S corporations can generate an AMT adjustment known as;Adjusted Current Earnings (ACE).;a.;True;b. False;1418. TF #25;The ACE adjustment associated with the C corporation AMT can only be positive.;a.;True;b. False;1419. TF #26;An S corporation election for Federal income tax purposes also is effective for;all states? income tax purposes.;a.;True;b. False;1420. TF #27;The tax treatment of S corporation shareholders with respect to fringe benefits;is not the same as the tax treatment;for C corporation shareholders but is the same as the fringe benefit treatment;for partners.;a.;True;b. False;1421. TF #28;Some fringe benefits always provide a deduction for the employer and are always;excluded from the gross income of the employee.;a.;True;b. False;1422. TF #29;Of the corporate types of entities, all are subject to double taxation on;current earnings.;a.;True;b. False;1423. TF #30;If the amounts are reasonable, salary payments to shareholder-employees can;reduce or avoid the double taxation result of a C corporation.;a.;True;b. False;1424. TF #31;If lease rental payments to a noncorporate shareholder-lessor are classified as;unreasonable, the taxable income of a C corporation remains the same and the;gross income of the shareholder increases.;a.;True;b. False;1425. TF #32;If the IRS reclassifies debt as equity under ? 385, the repayment of the debt;by the corporation to the shareholder automatically is treated as a dividend.;a.;True;b. False;1426. TF #33;Actual dividends paid to shareholders result in double taxation. Likewise;deemed dividends (e.g., free use of corporate assets by a shareholder) result;in double taxation.;a.;True;b. False;1427. TF #34;An effective way for all C corporations to avoid double taxation is not to make dividend distributions.;a.;True;b. False;1428. TF #35;The accumulated earnings tax rate in 2011 is the same as the highest tax rate;for a C corporation.;a.;True;b. False;1429. TF #36;A corporation can avoid the accumulated earnings tax by demonstrating that it;has plans to distribute earnings at a later date.;a.;True;b. False;1430. TF #37;Only C corporations are subject to the accumulated earnings tax (i.e., S;corporations are not).;a.;True;b. False;1431. TF #38;Roger owns 40% of the stock of Silver, Inc. (adjusted basis of $500,000).;Silver redeems 75% of his shares for $650,000. If the stock redemption;qualifies for return of capital treatment, Roger?s recognized gain is $150,000.;a.;True;b. False;1432. TF #39;In its first year of operations, a corporation projects losses of $200,000.;Since losses are involved, the corporation definitely should elect S;corporation status.;a.;True;b. False;1433. TF #40;Dave contributes land (adjusted basis of $30,000, fair market value of;$100,000) to Tan, Inc., in exchange for all of its stock. The land is;encumbered by a mortgage of $27,000 which Tan assumes. Since the transaction;qualifies for nonrecognition treatment under ? 351, Tan?s adjusted basis for;the land is $73,000 ($100,000 ? $27,000) and Dave?s adjusted basis for the;stock is $3,000 ($30,000 ? $27,000).;a.;True;b. False;1434. TF #41;Amos contributes land with an adjusted basis of $70,000 and a fair market value;of $100,000 to White, Inc., an S corporation, in exchange for 50% of the stock;of White, Inc. Carol contributes cash of $100,000 for the other 50% of the;stock. If White later sells the land for $110,000, $35,000 [$30,000 +;50%($10,000)] is allocated to Amos and $5,000 ($10,000 ? 50%) is allocated to;Carol.;a.;True;b. False;1435. TF #42;To the extent of built-in gain or built-in loss at the time of contribution;partnerships may choose to allocate or not allocate this built-in gain or loss;to the contributing partner on the sale of the contributed property by the;partnership.;a.;True;b. False;1436. TF #43;If an individual contributes an appreciated personal use asset to a C;corporation in a transaction which qualifies for nonrecognition treatment under;? 351, the corporation?s basis in the asset is the same as was the;shareholder?s adjusted basis.;a.;True;b. False;1437. TF #44;Wally contributes land (adjusted basis of $30,000, fair market value of;$100,000) to an S corporation in a transaction which qualifies under ? 351. The;corporation subsequently sells the land for $120,000, recognizing a gain of;$90,000 ($120,000 ? $30,000). If Wally owns 30% of the stock, $76,000 [$70,000;+ 30%($20,000)] of the $90,000 recognized gain is allocated to Wally.;a.;True;b. False;1438. TF #45;It is easier to satisfy the ? 721 requirements for the nonrecognition of gain;or loss on partner contributions than it is to satisfy the ? 351 requirements;for the nonrecognition of gain or loss on shareholder contributions.;a.;True;b. False;1439. TF #46;The profits of a business owned by Taylor (60%) and Maggie (40%) for the;current tax year are $100,000. If the business is a C corporation or an S;corporation, there is no effect on Taylor?s basis in her stock. If the business;is a partnership or an LLC, Taylor?s basis in her partnership interest or basis;in her stock is increased by $60,000.;a.;True;b. False;1440. TF #47;Carol is a 60% owner of a business entity and has an adjusted basis in such;interest of $60,000. For the current tax year, the entity has profits of;$50,000. If the entity is a C corporation, the corporate profits have no effect;on Carol?s basis in her stock. However, if the entity is an S corporation;Carol?s basis increases to $90,000 [$60,000 + (60% ? $50,000)].;a.;True;b. False;1441. TF #48;A benefit of an S corporation when compared with a C corporation is that it is;subject to Federal income tax only in limited circumstances.;a.;True;b. False;1442. TF #49;If an S corporation distributes appreciated property as a dividend, it must;recognize gain as to the appreciation.;a.;True;b. False;1443. TF #50;Samantha?s basis for her partnership interest is $85,000. If she receives a;cash distribution of $95,000, her recognized gain is $10,000 and her basis for;her partnership interest is reduced to $0. Samantha is still a partner after;the distribution.;a.;True;b. False;1444. TF #51;Personal service corporations can offset passive activity losses against active;income, but not against portfolio income.;a.;True;b. False;1445. TF #52;The special allocation opportunities that are available to partnerships are;available to S corporations only if a majority of the corporate shareholders;elect to do so.;a.;True;b. False;1446. TF #53;From the perspective of the seller of a C corporation business whose assets;have appreciated, the seller prefers to sell the assets.;a.;True;b. False;1447. TF #54;Mercedes owns a 40% interest in Teal Partnership (basis of $35,000) which she;sells to Eric for $60,000. Mercedes? recognized gain of $25,000 will be classified as capital gain.;a.;True;b. False;1448. TF #55;Section 1244 ordinary loss treatment is available to shareholders in a C;corporation but not to those in an S corporation.;a.;True;b. False


Paper#59279 | Written in 18-Jul-2015

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