ACC 731 Exam 1 Questions and Answers
C Corporation - ANSWER Subject to an entity-level Federal income tax,
results in double tax
S Corporation - ANSWER -Separate entity, only pays special taxes
-Similar to partnership taxation, flow through taxation
Nontax Issues in Selecting Entity Form - ANSWER -Liability
-Capital-raising
-Transferability
-Continuity of life
-Centralized management
Limited Liability Companies (LLC) - ANSWER -allows owners to avoid
unlimited liability (major nontax advantage)
-treated as partnership for tax purposes, avoids double taxation (major tax
advantage)
Check-the-box Regulations - ANSWER -allows taxpayer to choose tax status
of entity without regard to corporate or non corporate characteristics
-entities with >1 owner can elect to be classified as partnership or
corporation
-entities with only 1 owner can elect to be classified as sole proprietorship or
as corporation
-election is not available to entities incorporated under state law or if
required to be corp under fed law
Charitable Contributions - Individuals - ANSWER -limited to 50% of AGI, 30%
for capital gain property unless election is made to reduce FMV of gift
-Excess charitable contribution carried over for 5 years
-amount of contribution is the FMV of capital gain property; ordinary income
property is limited to adjusted basis; capital gain property is treated as
ordinary income property if certain tangible personalty is donated to a
nonuse charity or a private non operating foundation is the donee
-Time of deduction-year in which payment is made
Charitable Contributions - Corporations - ANSWER -Limited in any tax year to
10% of taxable income computed w/o regard to the charitable contribution
deduction, NOL carry back, capital loss carry back, dividends received
deduction, and domestic production activities deduction
-Excess of 10% limit can be carried over for 5 years
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, -Time of deduction-year in which payment is made unless accrual basis corp,
allows deduction in year preceding payment if authorized by board of
directors and paid within 2.5 months of year end
Casualty Losses - Individuals - ANSWER $100 floor on personal casualty and
theft losses; personal casualty losses deductible only to extent losses exceed
10% of AGI
Casualty Losses - Corporations - ANSWER Deductible in full
Net Operating Loss - Individual - ANSWER -Adjusted for several items,
including nonbusiness deductions over nonbusiness income and personal
exemptions
-Carryback period is 2 years, while carry forward is 20 years
Net Operating Loss - Corporations - ANSWER -No adjustments
-Carryback 2 years, carry forward 20
Dividends Received Deduction - ANSWER 70%,80%, or 100% of dividends
received depending on percentage of ownership by corporate shareholder
Net Capital Gains - Individuals - ANSWER Taxed in full. generally 15 or 20%
on net capital gains
Net Capital Gains - Corporations - ANSWER taxed in full
Capital Losses - Individuals - ANSWER Only $3000 of capital loss per year can
offset ordinary income; unused loss is carried forward indefinitely to offset
capital gains or ordinary income up to $3000; short-term and long-term
carryovers retain their character
Capital Losses - Corporations - ANSWER Can offset only capital gains;
unused loss is carried back 3 years and forward 5; carryovers and carry
backs are characterized as short-term losses
Passive Losses - Individuals - ANSWER In general, passive losses cannon
offset either active income or portfolio income
Passive Losses - Corporations - ANSWER Passive loss rules apply to closely
held C corps and personal service corps:
-C corp- may offset active income, but not portfolio income
-PSC- cannot offset either active income or portfolio income
Domestic Production Activities Deduction - ANSWER Based on 9% of the
lesser of qualified production activities income (QPAI) or modified AGI
(individuals)/taxable income (corps)
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C Corporation - ANSWER Subject to an entity-level Federal income tax,
results in double tax
S Corporation - ANSWER -Separate entity, only pays special taxes
-Similar to partnership taxation, flow through taxation
Nontax Issues in Selecting Entity Form - ANSWER -Liability
-Capital-raising
-Transferability
-Continuity of life
-Centralized management
Limited Liability Companies (LLC) - ANSWER -allows owners to avoid
unlimited liability (major nontax advantage)
-treated as partnership for tax purposes, avoids double taxation (major tax
advantage)
Check-the-box Regulations - ANSWER -allows taxpayer to choose tax status
of entity without regard to corporate or non corporate characteristics
-entities with >1 owner can elect to be classified as partnership or
corporation
-entities with only 1 owner can elect to be classified as sole proprietorship or
as corporation
-election is not available to entities incorporated under state law or if
required to be corp under fed law
Charitable Contributions - Individuals - ANSWER -limited to 50% of AGI, 30%
for capital gain property unless election is made to reduce FMV of gift
-Excess charitable contribution carried over for 5 years
-amount of contribution is the FMV of capital gain property; ordinary income
property is limited to adjusted basis; capital gain property is treated as
ordinary income property if certain tangible personalty is donated to a
nonuse charity or a private non operating foundation is the donee
-Time of deduction-year in which payment is made
Charitable Contributions - Corporations - ANSWER -Limited in any tax year to
10% of taxable income computed w/o regard to the charitable contribution
deduction, NOL carry back, capital loss carry back, dividends received
deduction, and domestic production activities deduction
-Excess of 10% limit can be carried over for 5 years
This study source was downloaded by 100000848900824 from CourseHero.com on 08-02-2023 13:06:48 GMT -05:00
https://www.coursehero.com/file/169679219/ACC-731-Exam-1-Questions-and-Answers-2022docx/
, -Time of deduction-year in which payment is made unless accrual basis corp,
allows deduction in year preceding payment if authorized by board of
directors and paid within 2.5 months of year end
Casualty Losses - Individuals - ANSWER $100 floor on personal casualty and
theft losses; personal casualty losses deductible only to extent losses exceed
10% of AGI
Casualty Losses - Corporations - ANSWER Deductible in full
Net Operating Loss - Individual - ANSWER -Adjusted for several items,
including nonbusiness deductions over nonbusiness income and personal
exemptions
-Carryback period is 2 years, while carry forward is 20 years
Net Operating Loss - Corporations - ANSWER -No adjustments
-Carryback 2 years, carry forward 20
Dividends Received Deduction - ANSWER 70%,80%, or 100% of dividends
received depending on percentage of ownership by corporate shareholder
Net Capital Gains - Individuals - ANSWER Taxed in full. generally 15 or 20%
on net capital gains
Net Capital Gains - Corporations - ANSWER taxed in full
Capital Losses - Individuals - ANSWER Only $3000 of capital loss per year can
offset ordinary income; unused loss is carried forward indefinitely to offset
capital gains or ordinary income up to $3000; short-term and long-term
carryovers retain their character
Capital Losses - Corporations - ANSWER Can offset only capital gains;
unused loss is carried back 3 years and forward 5; carryovers and carry
backs are characterized as short-term losses
Passive Losses - Individuals - ANSWER In general, passive losses cannon
offset either active income or portfolio income
Passive Losses - Corporations - ANSWER Passive loss rules apply to closely
held C corps and personal service corps:
-C corp- may offset active income, but not portfolio income
-PSC- cannot offset either active income or portfolio income
Domestic Production Activities Deduction - ANSWER Based on 9% of the
lesser of qualified production activities income (QPAI) or modified AGI
(individuals)/taxable income (corps)
This study source was downloaded by 100000848900824 from CourseHero.com on 08-02-2023 13:06:48 GMT -05:00
https://www.coursehero.com/file/169679219/ACC-731-Exam-1-Questions-and-Answers-2022docx/
