double taxation questions
Question # 00004828
Posted By:
Updated on: 12/06/2013 10:45 PM Due on: 12/31/2013
The "double taxation" of corporate income refers to the fact that corporate income is taxed at both the entity-level and the shareholder-level.
Question 1 options:
a) True
b) False
Save
Question 2 (6 points)
A distribution from a corporation to a shareholder will always be treated as a dividend for tax purposes.
Question 2 options:
a) True
b) False
Save
Question 3 (6 points)
A corporation's "earnings and profits" account is equal to the company's "retained earnings" account on its balance sheet.
Question 3 options:
a) True
b) False
Save
Question 4 (6 points)
A distribution from a corporation to a shareholder will only be treated as a dividend for tax purposes if the distribution is paid out of current or accumulated earnings and profits.
Question 4 options:
a) True
b) False
Save
Question 5 (6 points)
The term "earnings and profits" is well-defined in the Internal Revenue Code.
Question 5 options:
a) True
b) False
Save
Question 6 (6 points)
Income earned by flow-through entities is usually taxed once at the entity level.
Question 6 options:
a) True
b) False
Save
Question 7 (6 points)
Partnerships tax rules incorporate both the entity and aggregate approaches.
Question 7 options:
a) True
b) False
Save
Question 8 (6 points)
The term "outside basis" refers to the partnership's basis in its assets; whereas, the term "inside basis" refers an individual partner's basis in her partnership interest.
Question 8 options:
a) True
b) False
Save
Question 9 (6 points)
A partnership can elect to amortize organization and startup costs; however, syndication costs are not deductible.
Question 9 options:
a) True
b) False
Save
Question 10 (6 points)
Nonrecourse debt is generally allocated according to the profit-sharing ratios of the partnership.
Question 10 options:
a) True
b) False
Save
Question 11 (6 points)
A partner's debt relief from the sale of a partnership interest will decrease his outside basis.
Question 11 options:
a) True
b) False
Save
Question 12 (6 points)
In the sale of a partnership interest, a selling partner will recognize ordinary income (rather than capital gain) when the partnership assets include cash and land held for 5 years as an investment.
Question 12 options:
a) True
b) False
Save
Question 13 (6 points)
Hot assets include assets except cash, capital assets and §1231 assets.
Question 13 options:
a) True
b) False
Save
Question 14 (6 points)
Operating distributions terminate a partner's interest in the partnership.
Question 14 options:
a) True
b) False
Save
Question 15 (6 points)
In an operating distribution, when a partnership distributes property other than money with a basis that exceeds the partner's outside basis, the partner assigns a carryover basis to the distributed assets and recognizes a gain.
Question 15 options:
a) True
b) False
Save
Question 16 (6 points)
Jaime has a basis in her partnership interest of $50,000 when the partnership distributes (in an operating distribution) two parcels of land to Jaime, each valued at $30,000. The basis in parcel A is $40,000 and the basis in parcel B is $20,000. Jaime allocates $20,000 of basis to parcel A and $30,000 of basis to parcel B.
Question 16 options:
a) True
b) False
Save
Question 17 (6 points)
A partner recognizes gain when he receives cash in excess of his outside basis in a liquidating distribution.
Question 17 options:
a) True
b) False
Save
Question 18 (6 points)
S corporations offer the same legal protection to owners as C corporations.
Question 18 options:
a) True
b) False
Save
Question 19 (6 points)
The S corporation rules are less complex for S corporations that have earnings and profits from prior C corporation years than for S corporations that do not have earnings and profits from prior C corporation years.
Question 19 options:
a) True
b) False
Save
Question 20 (6 points)
The same exact requirements for forming and contributing property govern S corporations and partnerships.
Question 20 options:
a) True
b) False
Save
Question 21 (6 points)
S corporations may have no more than 50 shareholders, but members of the same family only count as one shareholder.
Question 21 options:
a) True
b) False
Save
Question 22 (6 points)
Differences in voting powers are permissible across shares of S corporation stock as long as the shares have identical distribution and liquidation rights.
Question 22 options:
a) True
b) False
Save
Question 23 (6 points)
Publicly traded corporations cannot be treated as S corporations.
Question 23 options:
a) True
b) False
Save
Question 24 (6 points)
To make an S election effective as of the beginning of the current year, an S corporation must file Form 2553 within 3 ½ months after the beginning of the year.
Question 24 options:
a) True
b) False
Save
Question 25 (6 points)
An S corporation may be voluntarily or involuntarily terminated.
Question 25 options:
a) True
b) False
Save
Question 26 (6 points)
Inventory is substantially appreciated if the fair market value of all inventory items exceeds 100% of their basis to the partnership.
Question 26 options:
a) True
b) False
Save
Question 27 (6 points)
Partners must generally treat the value of profits interests they receive in exchange for services as ordinary income.
Question 27 options:
a) True
b) False
Save
Question 28 (6 points)
Tax elections are rarely made at the partnership level.
Question 28 options:
a) True
b) False
Save
Question 29 (6 points)
Only income and deductions included on a corporation's income tax return are included in the computation of current earnings and profits.
Question 29 options:
a) True
b) False
Save
Question 30 (6 points)
Stock dividends are always tax-free to the recipient.
Question 30 options:
a) True
b) False
Save
Question 31 (6 points)
Gain or loss is always recognized when realized for tax purposes.
Question 31 options:
a) True
b) False
Save
Question 32 (6 points)
A taxpayer's tax basis in property always begins with its cost to the taxpayer.
Question 32 options:
a) True
b) False
Save
Question 33 (6 points)
Control as it relates to a section 351 transaction is strictly defined to be 80 percent or more of the voting power of the stock of the corporation to which property is transferred.
Question 33 options:
a) True
b) False
Save
Question 34 (6 points)
The definition of property as it relates to a section 351 transaction includes money.
Question 34 options:
a) True
b) False
Save
Question 35 (6 points)
A taxpayer must receive voting common stock to be eligible for deferral in a section 351 exchange.
Question 35 options:
a) True
b) False
Save
Question 36 (6 points)
M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction. The assumed liability will be treated as boot received by Jane.
Question 36 options:
a) True
b) False
Save
Question 37 (6 points)
Tax considerations always are the primary reason for how an acquisition is structured.
Question 37 options:
a) True
b) False
Save
Question 38 (6 points)
The tax basis of property received by a noncorporate shareholder in a complete liquidation will be the property's fair market value.
Question 38 options:
a) True
b) False
Save
Question 39 (6 points)
Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder?
Question 39 options:
a) The distribution is a dividend to the extent of the corporation's earnings and profits, then a return of capital, and finally gain from sale of stock.
b) The distribution is a return of capital, then a dividend to the extent of the corporation's earnings and profits, and finally gain from sale of stock.
c) The distribution is a return of capital, then gain from sale of stock, and finally a dividend to the extent of the corporation's earnings and profits.
d) The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation's earnings and profits or a return of capital, followed by gain from sale of stock.
Save
Question 40 (6 points)
A calendar-year corporation has negative current E&P of $500 and accumulated positive E&P of $1,000. The corporation makes a $600 distribution to its sole shareholder. Which of the following statements is true?
Question 40 options:
a) $500 of the distribution will be a dividend because total earnings and profits is $500.
b) $0 of the distribution will be a dividend because current earnings and profits is negative.
c) $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000.
d) Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution.
Save
Question 41 (6 points)
Which of the following statements best describes the tax law approach to recognizing gain or loss realized in an exchange?
Question 41 options:
a) Gain and loss realized is not recognized unless specifically stated otherwise in the Internal Revenue Code.
b) Gain and loss realized is recognized unless specifically stated otherwise in the Internal Revenue Code.
c) Gain realized is recognized unless specifically stated otherwise in the Internal Revenue Code, but loss realized is not recognized unless specifically stated otherwise in the Internal Revenue Code.
d) Loss realized is recognized unless specifically stated otherwise in the Internal Revenue Code, but gain realized is not recognized unless specifically stated otherwise in the Internal Revenue Code.
Save
Question 42 (6 points)
Roberta transfers property with a tax basis of $400 and a fair market value of $500 to a corporation in exchange for stock with a fair market value of $350 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $150 on the property transferred. What is the amount realized by Roberta in the exchange?
Question 42 options:
a) $500
b) $400
c) $350
d) $250
Save
Question 43 (6 points)
Which of these items is not an adjustment to taxable income or net loss to compute current E&P?
Question 43 options:
a) Dividends received deduction
b) Tax-exempt income
c) Net capital loss carryforward from the prior year tax return
d) Refund of prior year taxes for an accrual method taxpayer
Save
Question 44 (6 points)
Gerald received a 33% capital and profit (loss) interest in XYZ Limited Partnership (LP). In exchange for this interest, Gerald contributed a building with a FMV of $30,000. His adjusted basis in the building was $15,000. In addition, the building was encumbered with a $9,000 nonrecourse mortgage that XYZ, LP assumed at the time the property was contributed. What is Gerald's outside basis immediately after his contribution?
Question 44 options:
a) $6,000
b) $9,000
c) $21,000
d) $24,000
Save
Question 45 (6 points)
Under general circumstances, debt is allocated from the partnership to each partner in the following manner:
Question 45 options:
a) Recourse - profit sharing ratios; nonrecourse - profit sharing ratios
b) Recourse - capital ratios; nonrecourse - capital ratios
c) Recourse - to partners with the ultimate responsibility for paying the debt; nonrecourse - profit sharing ratios
d) Recourse - profit sharing ratios; nonrecourse - to partners with the ultimate responsibility for paying the debt
Save
Question 46 (6 points)
When must a partnership file its return?
Question 46 options:
a) By the 15th day of the 4th month after the partnerships tax year end
b) By the six month after the original due date if an extension is filed
c) By the 15th day of the 3rd month after the partnerships tax year end
d) A and B
e) B and C
Save
Question 47 (6 points)
Which of the following statements regarding the sale of a partnership interest is false?
Question 47 options:
a) The seller's primary tax concern in a partnership interest sale is calculating the amount and character of gain or loss on the sale.
b) The selling partner determines the gain or loss as the difference between the amount realized and her outside basis in the partnership.
c) Hot assets change the character of a gain on the sale from ordinary income to capital gain.
d) Any debt relief increases the amount the partner realizes from the sale.
Save
Question 48 (6 points)
Which of the following assets would not be classified as hot assets?
Question 48 options:
a) Inventory
b) Depreciation recapture
c) Cash
d) Accounts receivable for a cash method taxpayer.
Save
Question 49 (6 points)
Which of the following is prohibited from being an S corporation shareholder?
Question 49 options:
a) Foreign citizens that are U.S. residents.
b) U.S. citizens.
c) Corporations.
d) 51 unrelated individuals.
e) None of the above.
Save
Question 50 (6 points)
If Annie and Andy (each a 30% shareholder) file a revocation on February 10, 2010 to terminate their S corporation's S election, what is the effective date of the S corporation termination (assuming they do not specify one)?
Question 50 options:
a) January 1, 2010.
b) February 10, 2010.
c) January 1, 2011.
d) February 10, 2011.
Question 1 options:
a) True
b) False
Save
Question 2 (6 points)
A distribution from a corporation to a shareholder will always be treated as a dividend for tax purposes.
Question 2 options:
a) True
b) False
Save
Question 3 (6 points)
A corporation's "earnings and profits" account is equal to the company's "retained earnings" account on its balance sheet.
Question 3 options:
a) True
b) False
Save
Question 4 (6 points)
A distribution from a corporation to a shareholder will only be treated as a dividend for tax purposes if the distribution is paid out of current or accumulated earnings and profits.
Question 4 options:
a) True
b) False
Save
Question 5 (6 points)
The term "earnings and profits" is well-defined in the Internal Revenue Code.
Question 5 options:
a) True
b) False
Save
Question 6 (6 points)
Income earned by flow-through entities is usually taxed once at the entity level.
Question 6 options:
a) True
b) False
Save
Question 7 (6 points)
Partnerships tax rules incorporate both the entity and aggregate approaches.
Question 7 options:
a) True
b) False
Save
Question 8 (6 points)
The term "outside basis" refers to the partnership's basis in its assets; whereas, the term "inside basis" refers an individual partner's basis in her partnership interest.
Question 8 options:
a) True
b) False
Save
Question 9 (6 points)
A partnership can elect to amortize organization and startup costs; however, syndication costs are not deductible.
Question 9 options:
a) True
b) False
Save
Question 10 (6 points)
Nonrecourse debt is generally allocated according to the profit-sharing ratios of the partnership.
Question 10 options:
a) True
b) False
Save
Question 11 (6 points)
A partner's debt relief from the sale of a partnership interest will decrease his outside basis.
Question 11 options:
a) True
b) False
Save
Question 12 (6 points)
In the sale of a partnership interest, a selling partner will recognize ordinary income (rather than capital gain) when the partnership assets include cash and land held for 5 years as an investment.
Question 12 options:
a) True
b) False
Save
Question 13 (6 points)
Hot assets include assets except cash, capital assets and §1231 assets.
Question 13 options:
a) True
b) False
Save
Question 14 (6 points)
Operating distributions terminate a partner's interest in the partnership.
Question 14 options:
a) True
b) False
Save
Question 15 (6 points)
In an operating distribution, when a partnership distributes property other than money with a basis that exceeds the partner's outside basis, the partner assigns a carryover basis to the distributed assets and recognizes a gain.
Question 15 options:
a) True
b) False
Save
Question 16 (6 points)
Jaime has a basis in her partnership interest of $50,000 when the partnership distributes (in an operating distribution) two parcels of land to Jaime, each valued at $30,000. The basis in parcel A is $40,000 and the basis in parcel B is $20,000. Jaime allocates $20,000 of basis to parcel A and $30,000 of basis to parcel B.
Question 16 options:
a) True
b) False
Save
Question 17 (6 points)
A partner recognizes gain when he receives cash in excess of his outside basis in a liquidating distribution.
Question 17 options:
a) True
b) False
Save
Question 18 (6 points)
S corporations offer the same legal protection to owners as C corporations.
Question 18 options:
a) True
b) False
Save
Question 19 (6 points)
The S corporation rules are less complex for S corporations that have earnings and profits from prior C corporation years than for S corporations that do not have earnings and profits from prior C corporation years.
Question 19 options:
a) True
b) False
Save
Question 20 (6 points)
The same exact requirements for forming and contributing property govern S corporations and partnerships.
Question 20 options:
a) True
b) False
Save
Question 21 (6 points)
S corporations may have no more than 50 shareholders, but members of the same family only count as one shareholder.
Question 21 options:
a) True
b) False
Save
Question 22 (6 points)
Differences in voting powers are permissible across shares of S corporation stock as long as the shares have identical distribution and liquidation rights.
Question 22 options:
a) True
b) False
Save
Question 23 (6 points)
Publicly traded corporations cannot be treated as S corporations.
Question 23 options:
a) True
b) False
Save
Question 24 (6 points)
To make an S election effective as of the beginning of the current year, an S corporation must file Form 2553 within 3 ½ months after the beginning of the year.
Question 24 options:
a) True
b) False
Save
Question 25 (6 points)
An S corporation may be voluntarily or involuntarily terminated.
Question 25 options:
a) True
b) False
Save
Question 26 (6 points)
Inventory is substantially appreciated if the fair market value of all inventory items exceeds 100% of their basis to the partnership.
Question 26 options:
a) True
b) False
Save
Question 27 (6 points)
Partners must generally treat the value of profits interests they receive in exchange for services as ordinary income.
Question 27 options:
a) True
b) False
Save
Question 28 (6 points)
Tax elections are rarely made at the partnership level.
Question 28 options:
a) True
b) False
Save
Question 29 (6 points)
Only income and deductions included on a corporation's income tax return are included in the computation of current earnings and profits.
Question 29 options:
a) True
b) False
Save
Question 30 (6 points)
Stock dividends are always tax-free to the recipient.
Question 30 options:
a) True
b) False
Save
Question 31 (6 points)
Gain or loss is always recognized when realized for tax purposes.
Question 31 options:
a) True
b) False
Save
Question 32 (6 points)
A taxpayer's tax basis in property always begins with its cost to the taxpayer.
Question 32 options:
a) True
b) False
Save
Question 33 (6 points)
Control as it relates to a section 351 transaction is strictly defined to be 80 percent or more of the voting power of the stock of the corporation to which property is transferred.
Question 33 options:
a) True
b) False
Save
Question 34 (6 points)
The definition of property as it relates to a section 351 transaction includes money.
Question 34 options:
a) True
b) False
Save
Question 35 (6 points)
A taxpayer must receive voting common stock to be eligible for deferral in a section 351 exchange.
Question 35 options:
a) True
b) False
Save
Question 36 (6 points)
M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction. The assumed liability will be treated as boot received by Jane.
Question 36 options:
a) True
b) False
Save
Question 37 (6 points)
Tax considerations always are the primary reason for how an acquisition is structured.
Question 37 options:
a) True
b) False
Save
Question 38 (6 points)
The tax basis of property received by a noncorporate shareholder in a complete liquidation will be the property's fair market value.
Question 38 options:
a) True
b) False
Save
Question 39 (6 points)
Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder?
Question 39 options:
a) The distribution is a dividend to the extent of the corporation's earnings and profits, then a return of capital, and finally gain from sale of stock.
b) The distribution is a return of capital, then a dividend to the extent of the corporation's earnings and profits, and finally gain from sale of stock.
c) The distribution is a return of capital, then gain from sale of stock, and finally a dividend to the extent of the corporation's earnings and profits.
d) The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation's earnings and profits or a return of capital, followed by gain from sale of stock.
Save
Question 40 (6 points)
A calendar-year corporation has negative current E&P of $500 and accumulated positive E&P of $1,000. The corporation makes a $600 distribution to its sole shareholder. Which of the following statements is true?
Question 40 options:
a) $500 of the distribution will be a dividend because total earnings and profits is $500.
b) $0 of the distribution will be a dividend because current earnings and profits is negative.
c) $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000.
d) Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution.
Save
Question 41 (6 points)
Which of the following statements best describes the tax law approach to recognizing gain or loss realized in an exchange?
Question 41 options:
a) Gain and loss realized is not recognized unless specifically stated otherwise in the Internal Revenue Code.
b) Gain and loss realized is recognized unless specifically stated otherwise in the Internal Revenue Code.
c) Gain realized is recognized unless specifically stated otherwise in the Internal Revenue Code, but loss realized is not recognized unless specifically stated otherwise in the Internal Revenue Code.
d) Loss realized is recognized unless specifically stated otherwise in the Internal Revenue Code, but gain realized is not recognized unless specifically stated otherwise in the Internal Revenue Code.
Save
Question 42 (6 points)
Roberta transfers property with a tax basis of $400 and a fair market value of $500 to a corporation in exchange for stock with a fair market value of $350 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $150 on the property transferred. What is the amount realized by Roberta in the exchange?
Question 42 options:
a) $500
b) $400
c) $350
d) $250
Save
Question 43 (6 points)
Which of these items is not an adjustment to taxable income or net loss to compute current E&P?
Question 43 options:
a) Dividends received deduction
b) Tax-exempt income
c) Net capital loss carryforward from the prior year tax return
d) Refund of prior year taxes for an accrual method taxpayer
Save
Question 44 (6 points)
Gerald received a 33% capital and profit (loss) interest in XYZ Limited Partnership (LP). In exchange for this interest, Gerald contributed a building with a FMV of $30,000. His adjusted basis in the building was $15,000. In addition, the building was encumbered with a $9,000 nonrecourse mortgage that XYZ, LP assumed at the time the property was contributed. What is Gerald's outside basis immediately after his contribution?
Question 44 options:
a) $6,000
b) $9,000
c) $21,000
d) $24,000
Save
Question 45 (6 points)
Under general circumstances, debt is allocated from the partnership to each partner in the following manner:
Question 45 options:
a) Recourse - profit sharing ratios; nonrecourse - profit sharing ratios
b) Recourse - capital ratios; nonrecourse - capital ratios
c) Recourse - to partners with the ultimate responsibility for paying the debt; nonrecourse - profit sharing ratios
d) Recourse - profit sharing ratios; nonrecourse - to partners with the ultimate responsibility for paying the debt
Save
Question 46 (6 points)
When must a partnership file its return?
Question 46 options:
a) By the 15th day of the 4th month after the partnerships tax year end
b) By the six month after the original due date if an extension is filed
c) By the 15th day of the 3rd month after the partnerships tax year end
d) A and B
e) B and C
Save
Question 47 (6 points)
Which of the following statements regarding the sale of a partnership interest is false?
Question 47 options:
a) The seller's primary tax concern in a partnership interest sale is calculating the amount and character of gain or loss on the sale.
b) The selling partner determines the gain or loss as the difference between the amount realized and her outside basis in the partnership.
c) Hot assets change the character of a gain on the sale from ordinary income to capital gain.
d) Any debt relief increases the amount the partner realizes from the sale.
Save
Question 48 (6 points)
Which of the following assets would not be classified as hot assets?
Question 48 options:
a) Inventory
b) Depreciation recapture
c) Cash
d) Accounts receivable for a cash method taxpayer.
Save
Question 49 (6 points)
Which of the following is prohibited from being an S corporation shareholder?
Question 49 options:
a) Foreign citizens that are U.S. residents.
b) U.S. citizens.
c) Corporations.
d) 51 unrelated individuals.
e) None of the above.
Save
Question 50 (6 points)
If Annie and Andy (each a 30% shareholder) file a revocation on February 10, 2010 to terminate their S corporation's S election, what is the effective date of the S corporation termination (assuming they do not specify one)?
Question 50 options:
a) January 1, 2010.
b) February 10, 2010.
c) January 1, 2011.
d) February 10, 2011.
-
Rating:
/5
Solution: double taxation questions