Question 1

Barb and Chuck each own one-half of the stock of Wren, Inc., a C corporation. Each shareholder has a stock basis of $175,000. Wren has accumulated E & P of $300,000. Wrens taxable income for the current year is $100,000, and it distributes $75,000 to each shareholder. Barbs stock basis at the end of the year is:

		$0.
		$100,000.
		$150,000.
		$175,000.
		None of the above.

Question 2

Arthur is the sole shareholder of Purple, Inc. Purples taxable income before the payment of Arthurs salary is $300,000. Based on this information, Arthur has the corporation pay him a salary of $200,000 and a bonus of $100,000. A reasonable salary and bonus would be $175,000. Which of the following is correct?

		The taxable income of Purple, Inc., is $0 ($300,000 $300,000 salary and bonus).
		The taxable income of Purple, Inc., is $100,000 ($300,000 $200,000).
		Arthur has salary and bonus income of $300,000.
		Arthur has salary and bonus income of $175,000 and dividend income of $125,000.
		None of the above.

Question 3

Which of the following statements is incorrect?

		The number of owners of an LLC is not limited.
		If the LLC has three or more corporate characteristics, it will be taxed as a C corporation.
		An LLC can elect to be taxed as a C corporation or as a partnership.
		Only a. and c.
		a., b., and c. are incorrect.

Question 4

Factors that should be considered in making the S corporation election for the current tax year include the following:

		Are greater than 50% of the shareholders willing to consent to the election?
		Can the requirements for qualification be satisfied by the 15th day of the third month of the tax year and also for the period of the tax year that precedes this date?
		Will the corporation have total capital not in excess of $1 million?
		Only b. and c.
		a., b., and c.

Question 5

If a business entity has a majority of corporate characteristics, it is taxed as a corporation.

True

False