Randolph Scott operates a business as a sole proprietorship. This year his net profit was $10,570. For tax purposes this amount should be reported on: Schedule C, Statement of Profit or Loss from Business The first page of Form 1040 as other income A separate tax return prepared for the business operation Schedule E, Statement of Rent and Royalty Income Question 2 1 Point Aaron James has a qualifying home office. The office is 500 square feet and the entire house is 2,500 square feet. Use the following information to determine his allowable home office deduction: Net income from self-employment before home office deduction $ 150,000 Expenses from home (100%) Home mortgage interest 12,000 Property taxes 4,000 Homeowner's insurance 2,500 Utilities 2,200 Depreciation on office portion of home 1,100 $5,240 $4,140 $4,260 $21,800 Question 3 1 Point Janice earned $175,000 of qualified business income this year from her sole proprietorship and has taxable income, before any QBI deduction, of $150,000. Janice is permitted a QBI deduction of $35,000 $30,000 $25,000 $0 Question 4 1 Point Which of the following amounts are not subject to self-employment tax? General partner's share of partnership income Limited partner's share of partnership income Sole proprietor's income from business activity Guaranteed payment to general partner Question 5 1 Point During 2019, Scott Howell received a salary of $135,000. The social security base amount for 2019 was $132,900. How much payroll tax should have been withheld from Scott's salary for 2018? $0 $10,328 $9,823 $10,198 Question 6 1 Point During the current year, Margie earned wage income of $300,000. If Margie is single, which of the following statements regarding her Medicare tax liability is true? Margie will owe both the regular 1.45 percent Medicare tax and the additional .9 percent Medicare tax on her entire wage income. Margie will owe the regular 1.45 percent Medicare tax on her entire wage income and the additional .9 percent Medicare tax only on her wage income in excess of $200,000. Margie will owe the regular 1.45 percent Medicare tax on her entire wage income and the additional .9 percent Medicare tax only on her wage income in excess of $250,000. Margie's employer is required to withhold both the regular Medicare tax but does not withhold the additional .9 percent Medicare tax. Question 7 1 Point Which of the following statements about partnerships is false? A partnership is a legal entity that may enter into valid contracts. Partnerships are unincorporated entities. Only individuals may be partners in a partnership. Partnerships are sometimes referred to as passthrough entities since they do not pay federal income tax. Question 8 1 Point Which of the following statements concerning partnerships is false? A) A properly-drafted partnership agreement is crucial. B) A general partner's basis in a partnership includes his share of partnership debt. C) Limited partnerships must have at least one general partner. D) A partner is taxed annually on only that portion of a partnership's taxable income that is actually distributed. A properly-drafted partnership agreement is crucial. A general partner's basis in a partnership includes his share of partnership debt. Limited partnerships must have at least one general partner. A partner is taxed annually on only that portion of a partnership's taxable income that is actually distributed. Question 9 1 Point Which of the following statements regarding the basis limitation on deduction of partnership losses is false? If a partner's share of partnership losses exceeds the partner's tax basis in the partnership interest, the excess is not deductible in the current year. Partnership losses that are not deductible due to the basis limitation can be carried forward indefinitely. Partners can increase tax basis in their partnership interest only by making additional capital contributions. If a partnership becomes profitable in the future, the partner's share of such future income will create basis against which loss carryforwards can be deducted. Question 10 1 Point Loretta is the sole shareholder of Country Collectibles, a calendar year S corporation. Although Loretta spends at least 40 hours per week supervising Country Collectible's employees, she has never drawn a salary from the business. Country Collectibles has been in existence for five years and has earned a profit every year. Loretta withdraws $100,000 cash from the S corporation each year. Which of the following statements accurately describes the tax consequences of these withdrawals? The withdrawals are nontaxable, with no risk that they could be recharacterized as taxable salary or dividend payments. The withdrawals are considered taxable dividends to Loretta. There is significant risk that the IRS could recharacterize the payments to Loretta as salary. Such treatment would increase taxable income for both Loretta and the S corporation. There is significant risk that the IRS could recharacterize the payments to Loretta as salary. Such treatment would not change taxable income for Loretta and reduce taxable income of the S corporation