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ACCT 3013 QUIZZES TEST QUESTIONS AND ANSWERS
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ACCT 3013 QUIZZES TEST QUESTIONS AND ANSWERS...
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Ch. 10 Haddie's Hats is a regular corporation. The business must file anincome tax return each year to report its taxable income or loss and pay
any related taxes. T/F - ANSWER True
Ch. 10 Ms. Jack operates a service business as a sole proprietorship.
Her taxable income for the current year will be less than $100,000. Ms.
Jack is not eligible for the QBI deduction. T/F - ANSWER False
Ch. 10 Carter's share of a partnership's operating loss is $17,200. His
tax basis in his partnership interest before any adjustment for this loss is
$26,000. If Carter has no excess business loss, he may deduct the full
partnership loss on his tax return. T/F - ANSWER True
Ch. 10 The shareholders of an S corporation must pay self-employment
tax on their share of the corporation's ordinary income. T/F - ANSWER
False
Ch. 10 Which of the following statements about S corporations is true?
A) An S corporation has unlimited liability. B) An S corporation is a flow-
through entity for federal income tax purposes. C) S corporations can
only have 75 shareholders. D) S corporations can have several classes
of stock. - ANSWER n S corporation is a flow-through entity for federal
income tax purposes.
Ch. 10 Bernard and Leon formed a general partnership on January 1
with cash contributions of $600,000 and $200,000, respectively. The
partners agree to share profits and losses in the ratio of their initial
capital contributions. The partnership immediately borrowed $800,000.
What is Bernard's tax basis in his partnership interest? - ANSWER
$1,200,000
Explanation: $600,000 +($800,000[amt borrowed] * ($600,000/800,000))
, Ch. 10 Which of the following statements regarding a partner's tax basis
in a partnership interest is true? A) Partnership tax basis is increased
annually by cash distributions from the partnership. B) Partnership tax
basis is reduced by the partner's share of nondeductible partnership
expenses. C) Partnership tax basis is reduced by the partner's share of
nontaxable partnership income. D) Partnership tax basis becomes
negative if allocable losses exceed basis. - ANSWER Partnership tax
basis is reduced by the partner's share of nondeductible partnership
expenses.
Ch. 10 Funky Chicken is a caendar year general partnership with the
following current year information:
Operating loss: $(300,000)
Liabilities:
Note payable, Big Bank 30,000
Note payable, June Cross. 20,000
On January 1 June Cross bought 60% of Funky Chicken for $45,000.
How much of the operating loss may Cross deduct currently? Assume
the excess business loss limitation does not apply. - ANSWER $75,000
Explanation: For a general partner, tax basis includes a pro rata share of
all debt. Therefore, June gets basis for her cash and 60% of the debt.
Ch. 10 Which of the following statements regarding S corporations is
true? A) An S corporation may have no more than 50 shareholders. B)
Any individual, estate, corporation, or trust may be an S corporation
shareholder. C) An S corporation may have only one class of stock. D)
An S corporation shareholder's allocable share of ordinary income is
subject to self-employment tax. - ANSWER An S corporation may have
only one class of stock.
Ch. 10 In applying the basis limitation on the deduction of S corporation
losses, which of the following statements is true? A) The basis of a
shareholder's interest in an S corporation, for purposes of limiting
deductibility of losses, is computed in the same manner as a partner's
basis in a partnership interest. B) A shareholder is permitted to deduct
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