Nontax considerations in the selection of business form include limited liability, free transferability of ownership interests, continuity of life, and centralized management.

True

False

Question 2

A corporation is the only type of business that must pay its own income taxes on profits

True

False

Question 3

Fill in the blank:

The corporation must file a corporate tax return, IRS Form _______, and pay taxes at a corporate income tax rate on any profits.

1065

1040

1120

1114

Question 4

If the corporation's owners work for the corporation, they pay individual income taxes on their salaries and bonuses like regular employees of any company.

True

False

Question 5

If a corporation distributes dividends to the owners, they must report and pay self employment income tax on these amounts. And because dividends, unlike salaries and bonuses, are not tax-deductible, the corporation must also pay taxes on them.

True

False

Question 6

Generally, dividends are taxed twice -- once to the corporation and again to the shareholders

True

False

Question 7

A personal service corporation with taxable income of $100,000 will have a tax liability of $22,250.

True

False

Question 8

Section 351 States: No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in section 368(c)) of the corporation.

True

False

Question 9

IRC Section 351(b) States:

Receipt of property.

If subsection (a) would apply to an exchange but for the fact that there is received, in addition to the stock permitted to be received under subsection (a), other property or money, then

(1) gain (if any) to such recipient shall be recognized, but not in excess of

(A) the amount of money received, plus

(B) the fair market value of such other property received; and

(2) no loss to such recipient shall be recognized.

True

False

Question 10

From your Readings in IRS Pub 542 answer the following question: You and Sidd Jones buy property for $200,000. You both organize a corporation when the property has a fair market value of $350,000. You transfer the property to the corporation for all its authorized capital stock, which has a par value of $350,000. Pick the correct statement based on these facts:

You & Sidd each recognize $75,000 gain, none to the corporation

No gain is recognized by you, Sidd, or the corporation

No gain is recognized by you or Sidd. But the corporation recognizes $150,000 of

$0

Question 11

From your Readings in IRS Pub 542 answer the following question:

You transfer property worth $35,000 and render services valued at $3,000 to a corporation in exchange for stock valued at $38,000. Right after the exchange, you own 85% of the outstanding stock. No gain is recognized on the exchange of property. PIck the Correct statement....

However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation.

However, you recognize ordinary income of $1,500 as payment for services you rendered to the corporation.

Also, you recognize no ordinary income from the payment for services you rendered to the corporation.

There's nothing more to say.

Question 12

The basis of the stock you receive when you contribute capital to a Corporation is generally the adjusted basis of the property you transfer. Therefore, if you transfer land with a $60,000 basis and $75,000 fair market value to ABC Corp in exchange for 90% of ABC's stock. What is your Basis in your ABC corp stock?

$15,000

$75,000

$60,000

$0

Question 13

If a corporationhas an excess capital loss, it can deduct the loss in the current tax year.

True

False

Question 14

Most distributions to corporate shareholders are in money (cash). They may never be in stock or other property.

True

False

Question 15

Capitalization is simply the funding of the corporate entity.

True

False

Question 16

There are zero advantages to loaning money to a corporation instead of directly capitalizing it.

True

False