Question 1

Roberto and Reagan are both 25 percent owner/managers for Bright Light Enterprises. Roberto runs the retail store in Sacramento, CA, and Reagan runs the retail store in San Francisco, CA. Bright Light generated a $125,000 profit companywide made up of a $75,000 profit from the Sacramento store, a ($25,000)  loss from the San Francisco store, and a combined $75,000 profit from the remaining stores. If Bright Light is taxed as a partnership and decides that Roberto and Reagan will be allocated 70 percent of his own store's profit with the remaining profits allocated pro rata among all the owners, how much income will be allocated to Reagan?

Accepted Answer

A)   ($25,000) 
B)   ($17,500) 
C)   $5,000
D)   $20,000E) All of the above
F) B) and C)

Question 2

In certain circumstances, C corporations can elect to be treated as flow-through entities.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)   Limited Liability Company
B)   General Partnership
C)   Sole Proprietorship
D)   None of theseE) B) and C)
F) All of the above

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Losses from C corporations are never available to offset a shareholder's personal income.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not an effective strategy for mitigating the double tax associated with C corporations?

Accepted Answer

A)   Paying a salary to a shareholder-employee
B)   Leasing property from a shareholder
C)   Borrowing money from a shareholder
D)   Paying fringe benefits to a shareholder-employee
E)   All of these are effective strategies for mitigating double taxationF) A) and B)
G) A) and E)

Question 8

Shareholders of C corporations receiving property distributions must recognize dividend income equal to the fair market value of the distributed property if the distributing corporation has sufficient earnings and profits.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)   Liability protection
B)   Legal flexibility in defining rights and responsibilities of owners
C)   Facilitates initial public offerings
D)   Minimal time and cost to organizeE) All of the above
F) A) and B)

Question 10

Which legal entity is correctly paired with the party that bears the ultimate responsibility for paying the legal entity's liabilities?

Accepted Answer

A)   LLC - LLC members
B)   Corporation - Corporation
C)   General Partnership - Partnership
D)   Limited Partnership - General partner
E)   Both Corporation - Corporation and Limited Partnership - General partner.F) A) and B)
G) B) and E)

Exam 15: Entities Overview

Correct Answer
verified

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

Correct Answer
verified

In certain circumstances, C corporations can elect to be treated as flow-through entities.

Correct Answer
verified

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

Correct Answer
verified

Shareholders of C corporations receiving property distributions must recognize dividend income equal to the fair market value of the distributed property if the distributing corporation has sufficient earnings and profits.

Correct Answer
verified

Which of the following is not an effective strategy for mitigating the double tax associated with C corporations?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Which legal entity is correctly paired with the party that bears the ultimate responsibility for paying the legal entity's liabilities?

Correct Answer
verified

Losses from C corporations are never available to offset a shareholder's personal income.

Correct Answer
verified

Exam 15: Entities Overview

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In certain circumstances, C corporations can elect to be treated as flow-through entities.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Shareholders of C corporations receiving property distributions must recognize dividend income equal to the fair market value of the distributed property if the distributing corporation has sufficient earnings and profits.

Correct AnswerverifiedShow Answer

Which of the following is not an effective strategy for mitigating the double tax associated with C corporations?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which legal entity is correctly paired with the party that bears the ultimate responsibility for paying the legal entity's liabilities?

Correct AnswerverifiedShow Answer

Losses from C corporations are never available to offset a shareholder's personal income.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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