ITX - 35B Flashcards Preview

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Flashcards in ITX - 35B Deck (49)
1

Entity (Advantage): Dividends and capital gains taxed at low rates to shareholders

C Corporation

2

Entity (Advantage): Income taxed at rates of separate tax entity

C Corporation

3

Entity (Advantage): Exclusion for 70% of dividends received

C Corporation

4

Entity (Advantage): Deductible employee benefits

C Corporation

5

Entity (Advantage): Passive losses are deductible against active income

C Corporation

6

Entity (Advantage): Income-splitting among up to 100 investors

S Corporation

7

Entity (Advantage): Pass-through of income and losses, up to basis

S Corporation
LLC
Partnership
Limited Partnership

8

Entity (Advantage): No self-employment tax on earnings

S Corporation

9

Entity (Advantage): No accumulation earnings tax or reasonable compensation limit

S Corporation
LLC
Partnership
Limited Partnership
Sole Proprietorship

10

Entity (Advantage): Income-splitting among unlimited investors

LLC

11

Entity (Advantage): Basis is increased for liabilities and nonrecourse debt

LLC
Partnership
Limited Partnership

12

Entity (Advantage): Income-splitting among owners

Partnership
Limited Partnership

13

Entity (Advantage): No income from the distributions of property or in a liquidation

Partnership

14

Entity (Advantage): No self-employment income is received

Limited Partnership

15

Entity (Advantage): All income and losses are reported by the owner

Sole Proprietorship

16

Entity (Advantage): Corporate tax breaks, such as fringe benefits

Personal-Service Corporation

17

Entity (Advantage): No income tax advantages over the C corporation

Personal Holding Company

18

Entity (Disadvantage): Double taxation of earnings and in liquidation

C Corporation

19

Entity (Disadvantage): AMT applies unless it is a small ___

C Corporation
corporation

20

Entity (Disadvantage): Compensation must be reasonable

C Corporation

21

Entity (Disadvantage): Accumulated earnings tax applies

C Corporation

22

Entity (Disadvantage): Capital gains are taxed as ordinary income to the corporation

C Corporation

23

Entity (Disadvantage): Built-in gains tax

S Corporation

24

Entity (Disadvantage): LIFO recapture

S Corporation

25

Entity (Disadvantage): Excess net passive income tax

S Corporation

26

Entity (Disadvantage): Benefits are taxable to employees who are 2% shareholders

S Corporation

27

Entity (Disadvantage): Capital gains may result from converting a corporation to an ___

LLC
LLC

28

Entity (Disadvantage): Income is self-employment income

LLC
Partnership

29

Entity (Disadvantage): Benefits are taxable, except health insurance

LLC
Partnership
Sole Proprietorship

30

Entity (Disadvantage): Losses are passive, not deductible against active income

Limited Partnership

31

Entity (Disadvantage): No income-splitting

Sole Proprietorship

32

Entity (Disadvantage): Flat 35% income tax

Personal-Service Corporation

33

Entity (Disadvantage): Passive loss limits apply

Personal-Service Corporation

34

Entity (Disadvantage): 20% penalty tax on undistributed income

Personal Holding Company

35

Entity (Other Considerations): 1244 stock losses are deductible as ordinary losses (max. of $100,000 for joint filers)

C Corporation
S Corporation

36

Entity (Other Considerations): Net operating losses can be carried back 2 years and forward 20 years

C Corporation
Sole Proprietorship

37

Entity (Other Considerations): ISOs are taxed at the capital gains rate

C Corporation

38

Entity (Other Considerations): Basis in the stock is increased for shareholder loans to the corp., but not for increases in corp. liabilities

S Corporation

39

Entity (Other Considerations): A family ___ can be used for estate tax advantages

LLC
LLC

40

Entity (Other Considerations): Different ownership classes and allocations can be created

LLC

41

Entity (Other Considerations): Transfer of interests is restricted

LLC

42

Entity (Other Considerations): Departing members must be bought out, often on short notice

LLC

43

Entity (Other Considerations): Not appropriate if a public offering is planned

LLC

44

Entity (Other Considerations): IRS recognizes family members as ___ only if capital is a material income-producing factor or substantial services are performed

partners
Partnership

45

Entity (Other Considerations): IRS may reallocate distributed shares if disproportionate to capital contribution or services

Partnership

46

Entity (Other Considerations): ___ cannot be involved in management

limited partners
Limited Partnership

47

Entity (Other Considerations): Ownership and income tests apply

Personal Holding Company

48

Entity (Other Considerations): An S corporation cannot be a ___.

PHC
Personal Holding Company

49

Entity (Other Considerations): Estate tax advantages may apply

Personal Holding Company