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Ellen
Ellen, Doctoral Degree
Category: Multiple Problems
Satisfied Customers: 36714
Experience:  Lawyer, Accountant and Researcher
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5) Which of the following statements is incorrect? A.

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5) Which of the following statements is incorrect?

A. The number of S corporation shareholders is unlimited.
B. S corporations must allocate income and expenses to their shareholders based on their proportionate ownership interest.
C. S corporation losses can offset shareholder income from other sources.
D. S corporation income is taxed to shareholders when earned.



6) Which of the following statements is correct?

A. S shareholders are only taxed on distributions.
B. An owner of a C corporation is taxed on his or her proportionate share of earnings.
C. S shareholders are taxed on their proportionate share of earnings whether or not distributed.
D. S shareholders are taxed on their proportionate share of earnings that are distributed.



7) Identify which of the following statements is false.

A. Under the check-the-box regulations, an LLC that has only two members (owners) must be taxed as a partnership.
B. The check-the-box regulations permit an LLC to be taxed as a C corporation.
C. Once an election is made to change its classification, an entity cannot change again for 60 months.
D. A business need not be incorporated under state or federal law to be taxed as a corporation.



8) Identify which of the following statements is true.

A. Under the check-the-box regulations, an LLC that has one member (owner) may be disregarded as an entity separate from its owner.
B. An unincorporated business may not be taxed as a corporation.
C. A new LLC that is owned by four members elects to be taxed under its default classification (as a partnership) in its first year of operations. The entity is prohibited from changing its tax classification at any time in the future.
D. All are false.



9) Three members form an LLC in the current year. Which of the following statements is incorrect?

A. The LLC can elect to have its default classification ignored.
B. The LLC's default classification under the check-the-box rules is as a partnership.
C. If the LLC elects to use its default classification, it can elect to change its status to being taxed as a C corporation beginning with the third tax year after the initial classification.
D. The LLC can elect to be taxed as a C corporation with no special tax consequences.



10) Rose and Wayne form a new corporation. Rose contributes cash for 85% of the stock and Wayne contributes services for 15% of the stock. The tax effect is

A. Wayne must report the FMV of the stock received as capital gain.
B. Rose and Wayne must recognize their realized gains, if any.
C. Wayne must report the FMV of the stock received as ordinary income.
D. Rose and Wayne are not required to recognize their realized gains.



11) Matt and Sheila form Krupp Corporation. Matt contributes property with a FMV of $55,000 and a basis of $35,000. Sheila contributes property with a FMV of $75,000 and a basis of $40,000. Matt sells his stock to Paul shortly after the exchange. The transaction will

A. qualify under Sec. 351 if Matt can show the sale to Paul was not part of a prearranged plan
B. not qualify under Sec. 351
C. qualify under Sec. 351 only if an advance ruling has been obtained
D. qualify with respect to Sheila under Sec. 351 whether Matt qualifies or not



12) Identify which of the following statements is true.

A. A transferor's gain or loss that goes unrecognized when Sec. 351 applies is permanently exempt from taxation.
B. If a taxpayer transfers property and services as part of a transaction meeting the Sec. 351 requirements, all of the stock received is counted in determining whether the property transferors have acquired control.
C. If a taxpayer transfers property and services as part of a transaction meeting the Sec. 351 requirements, the nonrecognition of gain or loss will apply to the services.
D. All are false
13) Identify which of the following statements is true.

A. An election to forgo an NOL carryback must be made on or before the return due date (including extensions) for the year in which the NOL is incurred.
B. A corporate NOL can be carried back 2 years and forward 15 years.
C. All are false.
D. In computing an NOL for the current year, a deduction is allowed for NOLs from previous years.



14) A new corporation may generally select one of the following accounting methods with the exception of

A. accrual method
B. cash method
C. hybrid method
D. retail method
Thank you so much for your question. I am working on your answer
Welcome,

Thank you so much for directing your new question to me.

Here are my answers for comparison with your own:

5 The number of S corporation shareholders is unlimited
6 S shareholders are taxed on their proportionate share of earnings whether or not distributed.
7 Under the check-the-box regulations, an LLC that has only two members (owners) must be taxed as a partnership
8 Under the check-the-box regulations, an LLC that has one member (owner) may be disregarded as an entity separate from its owner.
9 If the LLC elects to use its default classification, it can elect to change its status to being taxed as a C corporation beginning with the third tax year after the initial classification
10 Wayne must report the FMV of the stock received as ordinary income.
11qualify under Sec. 351 if Matt can show the sale to Paul was not part of a prearranged plan
12 All are false
13 An election to forgo an NOL carryback must be made on or before the return due date (including extensions) for the year in which the NOL is incurred
14 retail method

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