True or False Questions

1. By maximizing the amount of compensation paid to an owner-employee, an S corporation will maximize the amount of the owner-employees income that potentially qualifies for the deduction for qualified business income (QBI deduction)
2. ABC Corporation owns 40% of the stock of XYZ Corporation. Both corporations are calendar-year C corporations. During 2023, XYZ Corporation paid a $100,000 dividend to ABC Corporation. ABC Corporation had a net operating loss (NOL) during 2023 of $1,000,000 (before considering any dividends received deduction (DRD) to which it might be entitled). ABC Corporations DRD in 2023 will be $65,000
3. XYZ Corporation, a calendar-year C corporation, has a $500,000 net operating loss (NOL) carryover to 2023 that originated in 2017. XYZ Corporations taxable income in 2023 (before any NOL deduction) is $600,000. XYZ Corporations taxable income in 2023 after the NOL deduction is $120,000
4. Every shareholders flow-through business income allocation from an S corporation is exempt from both self-employment tax and the net investment income tax
5. DEF Corporation, a calendar-year C corporation, had gross receipts of $20 million in 2020, $30 million in 2021, $40 million in 2022, and $15 million in 2023. DEF Corporation is eligible to use the cash method of accounting to compute its taxable income in 2023.
6. When determining whether the wage-based limitation applies to the qualified business income of a business, the status of the business as a specified service trade or business is irrelevant
7. A limited liability company (LLC) with 3 owners can elect to be characterized as a C corporation for federal income tax purposes
8. The 12-month rule applies to both cash-method and accrual-method taxpayers to determine the timing of income recognitio