Module 15 REG

Lane Inc., an S corporation, pays single coverage health insurance premiums of $4,800 per year and additional premiums of $7,200 per year for family coverage. Mill is a ten percent shareholder-employee in Lane. On Mill's behalf, Lane pays Mill's family coverage under the health insurance plan. What amount of insurance premiums is includible in Mill's gross income?

$12,000

The following information pertains to Wald Corp.'s operations: Worldwide taxable income$300,000U.S. source taxable income180,000U.S. income tax before foreign tax credit96,000Foreign source taxable income120,000Foreign income taxes paid on foreign source taxable income39,000 What amount of foreign tax credit may Wald claim?

$38,400

Which one of the following is a difference between an S corporation and a partnership?

All owners of an S corporation have limited liability but general partners in a partnership have unlimited liability.

A business owner who also plans to work in the business wants to take maximum advantage of the favorable fringe benefit rules provided in the tax law. Which entity type should the owner choose?

C corporation

A sole proprietor wants to incorporate and has requested a projection of the first-year tax results as a C corporation and as an S corporation. 2020 taxable income from ordinary operations is projected to be $100,000. The company expects to make a $20,000 charitable contribution and projects a long-term capital loss on stock of $7,000. Which of the following projections is correct?

C corporation, $90,000 taxable income; S corporation, $100,000 ordinary business income; remaining items are separately stated

Which of the following responses is incorrect with regard to charitable contributions by corporations?

Corporations and individuals can never deduct more than the adjusted basis of ordinary income property given to a charitable organization.

Which of the following credits is a combination of several tax credits to provide uniform rules for the current and carryback-carryover years?

General business credit.

Two individuals are planning to start a business and need advice on selecting the appropriate form of entity. Their long-term business plan contemplates receiving future in-kind property distributions. Which of the following is a pair of business entities each of which can make a distribution of appreciated property to its owners that would not be taxable to the business entity or to its owners?

General partnership and a limited liability partnership.

Sunex Co., an accrual-basis, calendar-year domestic C corporation, has income that is taxed in the United States and abroad. In the current year, Sunex's U.S. tax liability on its domestic and foreign-source income is $60,000 and no prior-year foreign income taxes have been carried forward. Which factor(s) may affect the amount of Sunex's foreign tax credit available in its current-year corporate income tax return?

Income source Foreign tax rate Yes Yes

Foreign income taxes paid by a corporation

May be claimed either as a deduction or as a credit, at the option of the corporation.

A business is expecting large losses in the first three years of its life. The owner would like to maximize the benefit from these losses on her personal tax return. Which entity type should the owner choose?

Partnership

For which of the following entities is the owner's basis increased by the owner's share of profits and decreased by the owner's share of losses but is NOT affected by the entity's bank loan increases or decreases?

S corporation.

Which of the following statements concerning S corporations is False?

S corporations are subject to the alternative minimum tax.

Which of the following statements is the best advice for a business that is making a strategic decision?

Tax factors and non-tax factors should both be given appropriate consideration in the decision.

Which of the following is required to claim the family and medical leave credit?

The credit percentage can never exceed 25%.

Which of the following types of entities is entitled to the net operating loss deduction?

The owner may participate in management while limiting personal liability.

The rule limiting the allowability of passive activity losses and credits applies to

The rule limiting the allowability of passive activity losses and credits applies to

Which of the following statements concerning tax credits is true?

The work opportunity tax credit is calculated on the amount of wages paid per eligible employee during the first year of employment. The maximum credit is $2,400 per eligible employee.

Which of the following types of entities is entitled to the net operating loss deduction?

Trusts and estates.

For the year 2020, when should a corporate taxpayer elect to forgo carryback of a net operating loss and instead carry the net operating loss forward?

When the taxpayer has low marginal tax rates in carryback years and expects to be in higher marginal rates in the future.