1. What are the 3 characteristics of sole proprietorship? Are these characteristics the same as or different from those of a partnership? What are 3 characteristics of a limited liability company that differ from those of a partnership?

2. The Warner Corporation has gross income of 560,000. It has business expenses of 325,000 a capital loss of 20,000 and 2500 of interest income on temporary investments. What is the corporations taxable income?

3. Hunter Corporation has 250,000 in gross income, 125,000 in deductible business expenses, and a 12,000 business tax credit. Determine the corporations net tax liability.

4. June and John decide to form a business. They each plan to contribute 20,000 in exchange for a 50percent interest in the business. They will then take out a bank loan for 30,000 to cover the balance of their working capital needs. They expect that the business will make a profit of 64,000 in the first year and that it will not make any cash distributions that year. Excluding the business income, June, who files as head of household, has 475,000 of other ordinary taxable income. John is married and files a joint return, he and his wife have 130,000 of other ordinary taxable income. They want to know how much tax the business will pay and how much additional tax they will personally pay in 2015 if they form business as a partnership, S corporation, or C corporation. Consider only income taxes.

5. Carol has recently incorporated her sole proprietorship and is considering making an S election. The corporation has 200,000 of gross revenue and expenses of 75,000 before Carols salary. She plans to take a gross salary of 60,000 from the business and this will be her only income for the year. Compare the total tax burden for Carol and the corporation with and without the S election. Consider both income and employment taxes. Carol is single and does not itemize her deductions. She plans to reinvest all of the corporations net income after taxes into the business. Based on tax burden alone for 2015, should Carol make the S election?