13) Business assets of a sole proprietorship are owned by A) a member. B) an individual. C) a…

13) Business assets of a sole
proprietorship are owned by
A) a member.
B) an individual.
C) a partner.
D) a stockholder.

14) Identify which of the following
statements is false.
A) A solely owned corporation is a sole
proprietorship.
B) A sole proprietorship is a separate
taxable entity.
C) A sole proprietor is considered to be
an employee of the business.
D) All of the above are false.

15) Which of the following is an advantage
of a sole proprietorship over other business forms?
A) tax-exempt treatment of fringe benefits
B) the deduction for compensation paid to
the owner
C) low tax rates on dividends
D) ease of formation

16) Which of the following statements
about a partnership is true?
A) A partnership is a taxpaying entity.
B) Partners are taxed on distributions
from a partnership.
C) Partners are taxed on their allocable
share of income whether it is distributed or not.
D) Partners are considered employees of
the partnership.

17) Demarcus is a 50% partner in the DJ
partnership. DJ has taxable income for the year of $200,000. Demarcus received
a $75,000 distribution from the partnership. What amount of income related to
DJ must Demarcus recognize?
A) $200,000
B) $75,000
C) $100,000
D) $37,500

18) Which of the following statements is incorrect?
A) Limited partners’ liability for
partnership debt is limited to their amount of investment.
B) In a general partnership, all partners
have unlimited liability for partnership debts.
C) In a limited partnership, all partners
participate in managerial decision making.
D) All of the above are correct.

19) Identify which of the following
statements is true.
A) Regular corporation and C corporation
are synonymous terms.
B) Regular corporation and S corporation
are synonymous terms.
C) A partner is generally considered to be
an employee of the partnership.
D) All of the above are false.

20) Which of the following statements is
correct?
A) An owner of a C corporation is taxed on
his or her proportionate share of earnings.
B) S shareholders are only taxed on
distributions.
C) S shareholders are taxed on their
proportionate share of earnings that are distributed.
D) S shareholders are taxed on their
proportionate share of earnings whether or not
distributed.

21) Identify which of the following
statements is true.
A) C corporation operating losses are
deductible by the individual shareholders.
B) If a C corporation does not distribute
its income to its shareholders annually, double taxation cannot occur.
C) Capital losses incurred by a C
corporation can be used to offset the corporation’s ordinary income.
D) All of the above are false.

22) Bread Corporation is a C corporation
with earnings of $100,000. It paid $20,000 in dividends to its sole
shareholder, Gerald. Gerald also owns 100% of Butter Corporation, an S
corporation. Butter had net taxable income of $80,000 and made a $15,000
distribution to Gerald. What income will Gerald report from Bread and Butter’s
activities?
A) $35,000
B) $95,000
C) $100,000
D) $180,000

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