Test Bank for South-Western Federal Taxation 2014 Corporations Partnerships Estates and Trusts 37th Edition Hoffman, Raabe, Smith, Maloney, Young-2

Test Bank for South-Western Federal Taxation 2014 Corporations Partnerships Estates and Trusts 37th Edition Hoffman, Raabe, Smith, Maloney, Young-2. Tomas owns a sole proprietorship, and Lucy is the sole shareholder of a C corporation. In the current year both businesses make a net profit of $60,000. Neither business distributes any funds to the owners in the year. For the current year, Tomas must report $60,000 of income on his individual tax return, but Lucy is not required to report any income from the corporation on her individual tax return. True False 2. Carol and Candace are equal partners in Peach Partnership. In the current year, Peach had a net profit of $75,000 ($250,000 gross income – $175,000 operating expenses) and distributed $25,000 to each partner. Peach must pay tax on $75,000 of income. True False 3. Rajib is the sole shareholder of Robin Corporation, a calendar year S corporation. Robin earned net profit of $350,000 ($520,000 gross income – $170,000 operating expenses) and distributed $80,000 to Rajib. Rajib must report Robin Corporation profit of $350,000 on his Federal income tax return. True False 4. Donald owns a 45% interest in a partnership that earned $130,000 in the current year. He also owns 45% of the stock in a C corporation that earned $130,000 during the year. Donald received $20,000 in distributions from each of the two entities during the year. With respect to this information, Donald must report $78,500 of income on his individual income tax return for the year. True False 5. Quail Corporation is a C corporation with net income of $125,000 during the current year. If Quail paid dividends of $25,000 to its shareholders, the corporation must pay tax on $100,000 of net income. Shareholders must report the $25,000 of dividends as income. True False 6. Eagle Company, a partnership, had a short-term capital loss of $10,000 during the year. Aaron, who owns 25% of Eagle, will report $2,500 of Eagle’s short-term capital loss on his individual tax return. True False 7. Don, the sole shareholder of Pastel Corporation (a C corporation), has the corporation pay him a salary of $600,000 in the current year. The Tax Court has held that $200,000 represents unreasonable compensation. Don must report a salary of $400,000 and a dividend of $200,000 on his individual tax return. True False 8. Double taxation of corporate income results because dividend distributions are included in a shareholder’s gross income but are not deductible by the corporation. True False 9. Jake, the sole shareholder of Peach Corporation, a C corporation, has the corporation pay him $100,000. For tax purposes, Jake would prefer to have the payment treated as dividend instead of salary. True False 10. Thrush Corporation files Form 1120, which reports taxable income of $200,000. The corporation’s tax is $56,250. True False 11. The corporate marginal income tax rates range from 15% to 39%, while the individual marginal income tax rates range from 10% to 39.6%. True False 12. Employment taxes apply to all entity forms of operating a business. As a result, employment taxes are a neutral factor in selecting the most tax effective form of operating a business. True False 13. Under the “check-the-box” Regulations, a two-owner LLC that fails to elect to be to treated as a corporation will be taxed as a sole proprietorship. True False We offer online tutoring, help with assignments and essay writing for all Majors with a guaranteed pass. For assistance Contact Tutor Lucas: