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Exam 15: Entities Overview

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Question 41

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For tax purposes,only unincorporated entities can be considered to be disregarded entities.

A) True
B) False

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Question 42

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What document must an LLC file with the state to organize its business?

A) Articles of incorporation.
B) Certificate of LLC.
C) Articles or a certificate of organization.
D) Partnership agreement.
E) None of the choices are correct.An LLC does not have to file with the state to organize its business.

F) A) and B)
G) A) and C)

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Question 43

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S corporation shareholders are legally responsible for paying the S corporation's debts because S corporations are treated as flow-through entities for tax purposes.

Unincorporated entities with only one individual owner are taxed as sole proprietorships.

General partnerships are legally formed by filing a partnership agreement with the state in which the partnership will be formed.

Sole proprietorships are not treated as legal entities separate from their individual owners.

S corporations have more restrictive ownership requirements than other entities.

The excess loss limitations apply to owners of all of the following entities except which of the following?

If an individual forms a sole proprietorship,which nontax factor will be of greatest benefit to the sole proprietor?

Corporations are legally formed by filing articles of organization with the state in which the corporation will be created.

Which of the following legal entities files documents with the state to be formally recognized by the state?

Business income allocations from an S corporation to its shareholders are potentially subject to the 3.8 percent net investment income tax if the shareholders are passive investors in the S corporation.

An S corporation shareholder who is not a passive investor is allowed to deduct a business loss allocation from the S corporation to the extent of the shareholder's basis in the stock no matter how large the loss.

If individual taxpayers are the shareholders of PST Corporation and PST Corporation is a shareholder of MNO Corporation,how many levels of tax is MNO's pretax income potentially exposed to?

What is the maximum number of unrelated shareholders a C corporation can have,the maximum number of unrelated shareholders an S corporation can have,and the maximum number of partners a partnership may have,respectively?

Rodger owns 100 percent of the shares in Trevor Inc.,a C corporation.Assume the following for the current year: Given these assumptions,how much cash does Rodger have from the dividend after all taxes have been paid?

Which legal entity is generally best suited for going public?

An unincorporated entity with more than one owner is,by default,taxed as a partnership.

S corporation shareholders are subject to self-employment tax on business income allocations from the S corporation if they are actively involved in the S corporation's business.

In its first year of existence (2018),Aspen Corp.(a C corporation)reported a loss for tax purposes of $60,000.In 2019,it reports a $40,000 loss.For 2020,it reports taxable income from operations of $120,000.How much tax will Aspen Corp.pay for year 3?