ITX - 35B

Question 1

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

Answer 1

C Corporation

Question 2

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

Answer 2

C Corporation

Question 3

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

Answer 3

C Corporation

Question 4

Entity (Advantage): Deductible employee benefits

Answer 4

C Corporation

Question 5

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

Answer 5

C Corporation

Question 6

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

Answer 6

S Corporation

Question 7

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

Answer 7

S Corporation
LLC
Partnership
Limited Partnership

Question 8

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

Answer 8

S Corporation

Question 9

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

Answer 9

S Corporation
LLC
Partnership
Limited Partnership
Sole Proprietorship

Question 10

Entity (Advantage): Income-splitting among unlimited investors

Answer 10

LLC

Question 11

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

Answer 11

LLC
Partnership
Limited Partnership

Question 12

Entity (Advantage): Income-splitting among owners

Answer 12

Partnership

Limited Partnership

Question 13

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

Answer 13

Partnership

Question 14

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

Answer 14

Limited Partnership

Question 15

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

Answer 15

Sole Proprietorship

Question 16

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

Answer 16

Personal-Service Corporation

Question 17

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

Answer 17

Personal Holding Company

Question 18

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

Answer 18

C Corporation

Question 19

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

Answer 19

C Corporation

corporation

Question 20

Entity (Disadvantage): Compensation must be reasonable

Answer 20

C Corporation

Question 21

Entity (Disadvantage): Accumulated earnings tax applies

Answer 21

C Corporation

Question 22

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

Answer 22

C Corporation

Question 23

Entity (Disadvantage): Built-in gains tax

Answer 23

S Corporation

Question 24

Entity (Disadvantage): LIFO recapture

Answer 24

S Corporation

Question 25

Entity (Disadvantage): Excess net passive income tax

Answer 25

S Corporation

Question 26

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

Answer 26

S Corporation

Question 27

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

Answer 27

LLC | LLC

Question 28

Entity (Disadvantage): Income is self-employment income

Answer 28

LLC | Partnership

Question 29

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

Answer 29

LLC Partnership Sole Proprietorship

Question 30

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

Answer 30

Limited Partnership

Question 31

Entity (Disadvantage): No income-splitting

Answer 31

Sole Proprietorship

Question 32

Entity (Disadvantage): Flat 35% income tax

Answer 32

Personal-Service Corporation

Question 33

Entity (Disadvantage): Passive loss limits apply

Answer 33

Personal-Service Corporation

Question 34

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

Answer 34

Personal Holding Company

Question 35

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

Answer 35

C Corporation | S Corporation

Question 36

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

Answer 36

C Corporation | Sole Proprietorship

Question 37

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

Answer 37

C Corporation

Question 38

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

Answer 38

S Corporation

Question 39

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

Answer 39

LLC | LLC

Question 40

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

Answer 40

LLC

Question 41

Entity (Other Considerations): Transfer of interests is restricted

Answer 41

LLC

Question 42

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

Answer 42

LLC

Question 43

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

Answer 43

LLC

Question 44

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

Answer 44

partners | Partnership

Question 45

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

Answer 45

Partnership

Question 46

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

Answer 46

limited partners | Limited Partnership

Question 47

Entity (Other Considerations): Ownership and income tests apply

Answer 47

Personal Holding Company

Question 48

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

Answer 48

PHC | Personal Holding Company

Question 49

Entity (Other Considerations): Estate tax advantages may apply

Answer 49

Personal Holding Company