Chapter 4 Homework
True or False: Business income allocations from an S corporation to its shareholders are self-employment income to the shareholders
False
True or False: Corporations are legally formed by filing articles of agreement with the state in which the corporation will be created.
False
True or False: LLC members don't have as much flexibility as corporate shareholders to alter their legal arrangements with respect to one another, the corporation, and with outsiders.
False
True or False: Shareholders of C corporations are allowed to deduct their share of corporate losses on their own twx returns
False
True or False: The corporate tax rate is slightly higher than the top individual marginal tax rate.
False
What document must corporations file with the state to organize their business? a) Articles of incorporation b) Certificate of LLC c) Articles of organization d) Partnership agreement e) None of the choices are correct
a) Articles of incorporation
If partnerships retain their earnings, when will partners be taxed on the earnings. a) Partners will be taxed when they sell their shares at a gain b) Partners will be taxed as partnership earnings allocated to them at the end of the year whether they actually receive a distribution or not c) Partners will be taxed when they elect to be taxed on undistributed retained earnings d) Partners will be taxed when the earnings are distributed to the partners
b) Partners will be taxed as partnership earnings allocated to them at the end of the year whether they actually receive a distribution or not
True or False: Although corporate income is subject to double tax, in some circumstances, the overall tax rate for corporate income is lower than the tax rate for flow-through income.
True
True or False: For tax purposes, a single-member LLC is treated as either a sole proprietorship or a disregarded entity.
True
True or False: LLCs with multiple members may elect to be taxed as corporations.
True
True or False: Qualified dividends may be subject to a marginal tax rate of 23.8% (20% for the capital gain and 3.8% tax on net investment income) for taxpayers with income over a certain threshold.
True
Which of the following statements is true about compensation paid to owners who work for an entity taxed as a partnership? a) The entity is not allowed to deduct the compensation in computing its business income b) The entity must withhold self-employment tax no the compensation c) The compensation is self-employment income to the owner-worker d) The compensation is employee compensation
c) The compensation is self-employment income to the owner-worker
The amount of the qualified business income (QBI) deduction is subject to which of the following limitations/requirements? a) Wage-based limitation b) Specified service requirement c) Taxable income limitation d) All of the choices are correct
d) All of the choices are correct
Which tax classification(s) can potentially apply to legal corporations? a) S corporation b) Partnership c) C corporation d) S corporation and Partnership e) S corporation and C corporation f) Partnership and C corporation
e) S corporation and C corporation
