Question:
1.
Olga's proprietorship earned a total profit of $95,000 during the year and she withdrew $70,000 of this profit. Olga has to report $70,000 net income from the proprietorship on her individual income tax return.
2. Henry and Herman are equal members in Badger Enterprises, a calendar year limited liability company (LLC). In the year, Badger Enterprises had $305,000 gross income and $230,000 operating expenses. Badger made no distributions to the partners. Badger has to pay tax on $75,000 of income.
3. Quail Corporation is a C corporation with total income of $300,000 during 2010. If Quail paid dividends of $50,000 to its shareholders, the corporation has to pay tax on $300,000 of net income. Shareholders must also report the $50,000 of dividends as income.
4. In tax planning, the average tax rate is more significant than the marginal tax rate.
5. For a taxpayer in the 35% marginal tax bracket, a $100 tax CREDIT saves the taxpayer $100 of tax liability, whereas a $100 tax DEDUCTION saves the $35 of tax liability.
6. As a general rule, capital gains are preferable to ordinary income.
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7.
As a general rule, capital losses are preferable to ordinary losses.
8.
The tax terms "deduction" and "exclusion" have the same meaning
9.
A 6% corporate bond is always a better investment than a 4.5 percent municipal bond.
10.
Considering constant tax rates (and good tax planning), taxpayers could postpone income recognition and accelerate deduction recognition.
11. Custard Corporation reports a $500,000 taxable income from its operations. In addition, Custard has a $50,000 long-term capital profit from the sale of the investment. Custard can pay a maximum of $7,500 in taxes on the long-term capital profit.