Test - Tax in Small Business: Entity Comparison (2021) Test for new exam

Test - Tax in Small Business: Entity Comparison (2021) Test for new exam Test - Tax in Small Business: Entity Comparison (2021) Test Section 1 Western Equipment is a partnership with three general partners. Which item is NOT likely to require reconciliation between the books and tax return? Gross receipts. Guaranteed payments. Depreciation. Meals deductible at 50%. Mark for follow up Question 2 of 5. Which business is required to complete Schedule L, M-1, and M-2 to report balance sheet information on its return? East County Property Rentals, a partnership with $225,000 gross receipts and $500,000 total assets at the end of the tax year. Franky's Flowers, a sole proprietorship with $275,000 gross receipts and $150,000 total assets at the end of the tax year. Surreal Plastics, Inc., an S corporation with $215,000 gross receipts and $275,000 total assets at the end of the tax year. Executive Solutions, Inc., a C corporation with $245,000 gross receipts and $110,000 total assets at the end of the tax year. Mark for follow up Question 3 of 5. Which of the following taxpayers will NOT be eligible for a qualified business income (QBI) deduction for the business activity described? Alejandro is a sole proprietor. He actively participates in his business and has a net profit of $60,000 this year. Lindsay owns 10% of the shares of Gestures, Incorporated, an S corporation. She does not perform any services for the company. Her share of ordinary income is $3,000 this year. Jeff owns 20% of the shares of Woodbury, Incorporated, a C corporation. He occasionally performs services and receives Form W-2 for his earnings. Gina is a general partner of Business Case, a partnership. She actively participates in the business operation. Her share of ordinary income is $45,000 this year. Question 4 of 5. Quartzite Adhesives, Incorporated, is an S corporation with two shareholders, Keaton and Lucy. Which is a valid option for vehicle expenses? If the company owns the vehicle, it may claim the standard mileage rate if substantiation requirements are met. Keaton owns a vehicle. If the company has an accountable plan, Keaton may request reimbursement for his mileage at the standard mileage rate. Keaton owns a vehicle. If the company has an accountable plan, Keaton may use the company's credit card for all his vehicle expenses. If the company has an accountable plan, Keaton may request reimbursement for the mileage he drove using Lucy's vehicle. Mark for follow up Question 5 of 5. Murphy owns 10% of an S corporation. He does not perform services for the company. Which statement is TRUE about Murphy? Murphy will pay self-employment tax on guaranteed payments and his reasonable compensation. Murphy will not pay any tax on his share of income unless he takes distributions. Murphy will pay income tax on his share of ordinary income. The company will issue Murphy Form 1099-NEC to show his income subject to tax. Mark for follow up Question 2 of 5. George and Brooke own an unincorporated business together. Which form should be filed to report their business income? Schedule C (Form 1040) Form 1065 Form 1120 Form 1120-S Question 4 of 5. Which statement is FALSE? Deirdre is a sole proprietor. She will report her business income on Schedule C (Form 1040) and pay ordinary income tax and self-employment tax. Mary Lou is a limited partner. She does not perform any services for the partnership, but receives guaranteed payments. The partnership will report her share of income on Schedule K-1 (Form 1065). Mary Lou will pay income tax on the entire amount. She will not pay selfemployment tax. Carlos is a shareholder in an S corporation. He owns 15% of the shares and does not perform services for the company. The company will report his share of income on Schedule K-1 (Form 1120-S). Carlos will not pay self-employment tax on his share of the ordinary income. Antonio is a shareholder in a C corporation. He owns 55% of the shares and performs services for the company. His wages will be reported on Form W-2, and his share of the company's ordinary income will be reported to him on Schedule K-1 (Form 1120). Question 5 of 5. Youthglow Products, Incorporated is a C corporation. During the year, the company sold business assets held long-term at a gain. Which is TRUE about the tax treatment of the gains? Youthglow Products will pay 21% tax on the gains on Form 1120. The gain will be passed through to the shareholders' returns on Schedule K-1 (Form 1120) and taxed on Form 1040 as long-term capital gain. The gain will be allocated between all shareholders who perform services for the company and included in Form W-2 wages. Proceeds from the sale are included in Youthglow Products' gross receipts. Adjusted basis of the assets is included in cost of goods sold (COGS) on Form 1120-S.