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Exam 4: Entities Overview

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Question 31

Multiple Choice

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From a tax perspective, which entity choice is preferred when a liquidating distribution occurs and the entity has appreciated assets?

A) Partnership.
B) S corporation.
C) C corporation.
D) S corporation and C corporation.

E) B) and C)
F) B) and D)

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Question 32

Multiple Choice

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Which tax classifications can potentially apply to LLCs?

A) Partnership.
B) Partnership and sole proprietorship.
C) S corporation.
D) C corporation.
E) All of the choices are correct.

F) None of the above
G) C) and D)

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Question 33

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An S corporation shareholder who is not a passive investor is allowed to deduct a business loss allocation from the S corporation to the extent of the shareholder's basis in the stock no matter how large the loss.

What is the tax impact to a C corporation or an S corporation when it makes a (noncash) property distribution to a shareholder?

Sole proprietorships are not treated as legal entities separate from their individual owners.

If C corporations retain their after-tax earnings, when will their shareholders who are individuals be taxed on the retained earnings?

Which of the following statements is True regarding compensation paid to an owner of an entity taxed as a partnership who works for the entity?

If an individual forms a sole proprietorship, which nontax factor will be of greatest benefit to the sole proprietor?

Beginning in 2018, C corporations are no longer subject to double taxation.

On which tax form does a single member LLC with one individual owner report its income and losses?

Which of the following statements is False for a C corporation that incurred a net operating loss for a tax year ending in 2017?

If individual taxpayers are the shareholders of PST Corporation and PST corporation is a shareholder of MNO Corporation, how many levels of tax is MNO's pre-tax income potentially exposed to?

Unincorporated entities with only one individual owner are taxed as sole proprietorships.

P corporation owns 60 percent of the stock of S corporation. If S corporation distributes a dividend to P corporation, what is tax rate on the dividend after the dividends received deduction (DRD) if P is entitled to a 65 percent DRD?

If a C corporation incurs a net operating loss in 2017, it may carry the loss back two years and forward 20 years to offset income in those years. However, it may offset only 80% of the taxable income before the NOL deduction in those years.

Limited partnerships are legally formed by filing a certificate of limited partnership with the state in which the partnership will be organized.

On which tax form do LLCs with more than one owner generally report their income and losses?

Rodger owns 100% of the shares in Trevor Inc., a C corporation. Assume the following for the current year: Given these assumptions, how much cash does Rodger have from the dividend after all taxes have been paid?

What kind of deduction is the deduction for qualified business income?

Roberto and Reagan are both 25 percent owner/managers for Bright Light Inc. Roberto runs the retail store in Sacramento, CA, and Reagan runs the retail store in San Francisco, CA. Bright Light Inc. generated a $125,000 profit companywide made up of a $75,000 profit from the Sacramento store, a ($25,000) loss from the San Francisco store, and a combined $75,000 profit from the remaining stores. If Bright Light Inc. is an S corporation, how much income will be allocated to Roberto?