In the United States, _____ income typically suffers the highest rate of taxation.

a) domestic

b) national

c) personal

d) disposable

e) discretionary

Which of the following is a disadvantage of sole proprietorships?

a) Autonomy comes with limited ownership of the business's finances.

b) They have to pay ordinary income tax on their business profits.

c) There is a lack of flexibility.

d) It is difficult to create a sole proprietorship.

e) They have limited liability for business debts.

Which of the following statements is true about chapter 7 bankruptcy?

a) Corporations that satisfy the means test established by the BAPCPA may file for chapter 7 bankruptcy.

b) Only individuals, rather than partnerships, may receive a discharge under chapter 7 bankruptcy.

c) All debtors qualify for chapter 7 under the BAPCPA.

d) The liquidation that occurs in a chapter 7 bankruptcy is used to re-commence the business after the bankruptcy is over.

e) The court cannot liquidate the non-exempt assets of a debtor who files for chapter 7 bankruptcy.

The tax return that provides information to the taxing authority about a general partnership is called a (n):

a) Initial Public Offering (IPO)

b) Disregarded entity

c) 501(c)(3)

d) Information return

e) Buy/Sell agreement

Identify the correct statement about an arm's-length transaction.

a) It is a transactions in which one party sets aside independent interest so as to focus on the wishes of the controlling party.

b) It is a transaction involving a party that is controlled by another entity and does not act on its own behalf.

c) An arm's-length transaction should involve at least one interested party that is concerned about the probable consequences of the transaction.

d) It is a transaction made by parties as if they were unrelated, in a free market system, each acting in its own best interest.

e) A transaction involving subsidiaries would not be considered an arm's-length transaction because the parties are acting independently.