TRUE/FALSE ON TAX
1. An S corporation cannot incur a tax liability at the corporation level.
a. True
b. False
2. S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).
a. True
b. False
3. An estate may be a shareholder of an S corporation.
a. True
b. False
4. An S corporation cannot be a shareholder in another corporation.
a. True
b. False
5. If a resident alien shareholder moves outside the U.S., the S election is terminated.
a. True
b. False
6. An S election is made on the shareholder's Form 2553.
a. True
b. False
7. An S election made before becoming a corporation is valid only beginning with the first 12-month tax year.
a. True
b. False
8. For Federal income tax purposes, a business entity with two or more owners may be conducted as a partnership, C corporation, S corporation, or limited liability company.
a. True
b. False
9. If a business entity has a majority of corporate characteristics, it is taxed as a corporation.
a. True
b. False
10. A limited liability company (LLC) is a hybrid business form that combines the corporate characteristic of limited liability for the owners with the tax characteristics of a partnership.
a. True
b. False
11. A sole proprietorship files Schedule C of Form 1040, a partnership files Form 1065, a C corporation files Form 1120, and an S corporation files Form 1120S.
a. True
b. False
12. Each of the following can pass profits and losses through to the owners: general partnership, limited partnership, S corporation, and limited liability company.
a. True
b. False
13. A C corporation offers greater flexibility in terms of the types of owners and capital structure than an S corporation.
a. True
b. False
14. All of the shareholders of an S corporation have limited liability with respect to their ownership interests in the corporation, whereas only limited partners in a limited partnership have such limited liability.
a. True
b. False
15. In general, the purpose of ASC 740 (SFAS 109) is to compute and disclose the taxes payable by a business entity to state, local, Federal, and foreign governments, for the current year and all future years.
a. True
b. False
16. A deferred tax asset is the expected future tax benefit (savings) associated with income reported in the current year GAAP financial statements.
a. True
b. False
17. All organizations that are exempt from Federal income tax are exempt under § 501(c)(3).
a. True
b. False
18. An exempt entity in no circumstance is subject to Federal income tax.
a. True
b. False
19. Most states begin the computation of corporate taxable income with an amount from the Federal income tax return.
a. True
b. False
20. A state can levy an income tax on a business only if the business was incorporated in the state.
a. True
b. False
21. Typical indicators of income-tax nexus include the presence of customers in the state.
a. True
b. False
22. In most states, a taxpayer's income is apportioned on the basis of a formula measuring the extent of business contact, and allocated according to the location of property owned or used.
a. True
b. False
23. All of the U.S. states use an apportionment formula based on the sales, property, and payroll factors.
a. True
b. False
24. At one point, the tax rates applicable to transfers by gift were different than those applying to transfers by death.
a. True
b. False
25. Some states impose inheritance taxes, but the Federal tax system does not.
a. True
b. False
26. For Federal estate and gift tax purposes, the exemption equivalent is the same thing as the exclusion amount.
a. True
b. False
27. If the value of the gross estate is lower on the alternate valuation date than on the date of death, the date of death valuation cannot be used.
a. True
b. False
28. One of the objectives of family tax planning is to minimize income taxes on transfers of property within the family unit.
a. True
b. False
29. A complex trust pays tax on the income that it accumulates (i.e., that it does not distribute).
a. True
b. False
30. The first step in computing an estate's taxable income is the determination of its fiduciary accounting income for the year.
a. True
b. False.