7. Which of the following transactions is matched with a tax planning technique that will have the effect of minimizing or deferring taxes?

a. Parents transfer property to a trust. Income distributed from property deposited in trust for their children who are over 18 years of age is taxed at the childrens rate, rather than at the parents higher tax rate.

b. Corporation X pays no dividends this year. Income is deferred to the stockholders, since they do not pay tax until they receive the dividends.

c. J is in the 25 percent marginal tax bracket in 2021 and the 15 percent marginal tax bracket in 2022. J chooses to deduct certain discretionary expenses in 2021 rather than in 2022.

d. S, a heart surgeon, hires his two sons, ages 16 and 18, to clean his office four times a week. The two sons are legitimate employees and do the work they were hired to do.

e. All of the above.

9. The difference between a C corporation and a partnership is:

a. Partnerships never pay tax at the entity level, whereas C corporations do.

b. C corporations can only have 100 shareholders.

c. Partners do not have to pay self-employment tax on their share of partnership income.

4. Partnerships are subject to double taxation.
5. C corporation shareholders pay tax on their share of the taxable income of the corporation, regardless of how many dividends they receive.

10. A trust established for the benefit of A, age 23, and B, age 13, generated $8,000 of dividend income. The trustee distributed $2,000 to A and $1,500 to B. The taxable income of the trust (before the exemption deduction) is

a. $8,000.

b. $6,000.

c. $4,500.

d. $0.