Tax Accounting

Akram owns a C corporation that has generated a $10,000 loss in its first year. Akram has other forms of ordinary income totaling $80,000. Assuming Akram's marginal tax rate is 35% and a corporate rate of 21%, how much tax will Akram pay on the income? $25,900 $28,000 $16,800 $24,500

$28,000 Reason: Akram may NOT offset the loss from the corporation with his other income and will pay tax of $28,000 ($80,000 x 35%).

In general, a taxpayer can deduct __________ % of the amount of qualified business income allocated to her from a flow-through entity subject to certain limitations.

20%

The deduction for qualified business income (QBI) for flow-through entities is calculated as what percent of qualified business income? 65% 20% 50% 10%

20%

Generally, under state law, which of the following is NOT considered an entity separate from its owner(s)? A limited liability company A corporation A general partnership A sole proprietorship

A sole proprietorship

Match the entity with the description of income or loss allocation. C corporation Partnership S corporation Sole proprietorship Based on stock ownership percentage Based on owners' agreement no allocation All earnings allocated to owner

C corporation <------> No allocation Partnership <------> Based on owner's agreement S corporation <> Based on stock ownership percentage Sole proprietorship <--> All earnings allocated to owner

On their December 31, 2019 tax return, Ecogreen, Inc., a C corporation, suffered a difficult year and generated a loss. What are Ecogreen's options for dealing with the loss for tax purposes? Carry the loss back to previous three yrs and offset income from those years Use the loss in current year to offset other forms of shareholder income Carry the loss forward to reduce income in future yrs No options; the losses are not usable to lower taxes in any other yr

Carry the loss forward to reduce income in future years

Nolan seeks to protect himself from the debts his business is going to incur. Which of the following entities would be the best entity choice for Nolan? Corporation General partnership Sole proprietor

Corporation

Greta is concerned about the level of debt her business has incurred, as she is responsible for its liabilities. Assuming Greta is the sole owner, how could she organize her business to protect herself from the liabilities of the entity? (Check all that apply.) General partnership Corporation Limited partnership Single member limited liability company Sole proprietor

Corporation Single member limited liability company

Match the ultimate responsibility for debt with the legal entity type Corporation General Partnership Sole Proprietorship Entity General Partner Owner

Corporation <----------->Entity General Partnership <----------->General Partner Sole Proprietorship <----------->Owner

Which of the following legal entity types does not require the owners to formally organize the entity with the state? Limited Partnership General partners Limited Liability Company Corporation

General Partnership

Which owner is ultimately responsible for the liabilities of the business? Limited liability company members General partners Limited partners Corporate shareholders

General partners

Match the type of shareholder with the typical tax rate on corporate dividends. Individual Corporate (before the DRD) Pension funds 15% or 20% 0% 21%

Individual <---------> 15% or 20% Corporate (before the DRD)<--------->21% Pension funds <---------> 0%

Which entity types can generally use either the cash or accrual method of accounting for tax purposes? (Check all that apply.) Sole proprietorship Partnership S corporation C corporation

Sole proprietorship Partnership S corporation

Generally, state law classifies business entities as: (Check all that apply.) S corporations venture capital entities corporations business trusts limited liability companies

corporations. limited liability companies.

Unlike separate taxpaying entities, ____________ entities do NOT pay taxes. Rather, owners of these entities pay taxes on income generated by the entities.

flow-through, flow through, conduit, pass through, or pass-through

Generally, under state law, business partnerships can be classified as: (Check all that apply.) Oral Public Limited Trust General

limited general

Generally, under state law, business partnerships can be classified as: (Check all that apply.) Oral Trust Limited General Public

limited. general.

Jonas, an individual taxpayer, establishes his business as an LLC, for which he is the only member (owner). By default, his business will be treated as a _________ for tax purposes. partnership separate taxpaying entity sole proprietorship

sole proprietorship