Which form of business organization is limited by the Internal Revenue Code $($IC$)$ concerning the number and type of shareholders?

$$ A partnership

$$ An S corporation

$$ A C corporation

$$ A sole proprietorship

What is one tax advantage of a sole proprietorship?

$$ It uses the same accounting period for business and personal uses.

$$ It may not deduct compensation paid to owner$-$employees

$$ It is not subject to taxation as a separate entity.

$$ It is taxed based on the profits of the business, whether the profits are kept in the business or used for personal use.

What is an advantage of the partnership form of business?

$$ The income of a partnership is taxed at the partnership level.

$$ A partner is subject to self$-$employment tax rather than the partnership tax.

$$ Partners report their share of partnership losses on their annual returns.

$$ A partnership files an entity return, and the partners file separate returns.

Why would it be beneficial for a C corporation to avoid making distributions to its shareholders?

$$ If retained in the business, the corporate earnings cannot be reinvested and used to reduce debt.

$$ The corporation's marginal rate may be lower than the owners' marginal rates.

$$ Shareholders are not taxed on the corporation's earnings unless the earnings are distributed.

$$ If the earnings are retained, the corporation is subject to the accumulated earnings tax but not the Foreign Repatriation Tax.

How can a C corporation make payments to shareholders and avoid double taxation of its corporate income?

$$ By distributing property instead of cash to the shareholders

$$ By paying its shareholder$-$employees a salary instead of a dividend

$$ By retaining its earnings and not pay out dividends for several years

$$ By using net operating loss carryforwards to offset corporate income

What is one advantage of an S corporation?

$$ Dividends usually received by an S corporation are eligible for the dividends received deduction.

$$ An S corporation's income is typically exempt from a corporate level tax.

$$ The S corporation's earnings are taxed to the shareholders whether or not they are distributed.

$$ The tax rate on the first $$50,000$ of S corporation income is $15\%.$

If a large publicly traded corporation in the U$.$S$.$ has a June $30$ year$-$end, which year$-$end must the corporation use when preparing its federal corporate tax return?

$$ December $31$

$$ June $30$

$$ July $1$

$$ January $1$

A calendar$-$year, accrual$-$basis corporation expects to have $$2\mathrm{.}000,000$ in gross income for the current year. it implements a long$-$term bonus program for its employees. To do this, they plan to pay out $$500,000$ in bonuses to their top $20$ outstanding salespeople

The corporation immediately signs a promise to pay these bonuses to the employees. The bonuses will be paid out in equal annual increments each February for the next four years.

Assuming the corporation has $$600,000$ in other deductions this year, how much will its taxable income for the current year be$?$

$$ $$900,000$

$$ $$1,275,000$

$$ $$1,500,000$

$$ $$1,875,000$

A February $28$ fiscal$-$year, accrual$-$basis corporation donates $$25,000$ cash to a national charity foundation on March $31,2022.$ The board of directors approved the donation on February $1,2022.$

On which tax return can this corporation deduct the charitable contributions?

$$ December $31,2021$

$$ February $28,2022$

$$ December $31,2022$

$$ February $28,2023$

A corporation has a taxable income of $$100,000.$

What is this corporation's income tax liability?

$$ $$15,000$

$$ $$21,000$

$$ $$25,000$

$$ $$34,000$

How do corporations account for capital gains for tax purposes?

$$ Capital gains may be carried forward five years to offset capital losses.

$$ Capital gains are taxed at the corporation's ordinary rates.

$$ Capital gains are taxed at preferential rates.

$$ Capital gains may be carried back three years to offset capital losses.

How do corporations account for federal income tax expense for tax purposes?

$$ As a favorable temporary adjustment

$$ As a favorable permanent adjustment

$$ As an unfavorable permanent adjustment

$$ As an unfavorable temporary adjustment

How do corporations account for entertainment expense for tax purposes?

$$ As an unfavorable permanent adjustment

$$ As an unfavorable temporary adjustment

$$ As a favorable permanent adjustment

$$ As a favorable temporary adjustment

What is an advantage of using debt in a corporation's capital structure?

$$ The full value of the debt is taxed at the capital gains tax rate.

$$ The interest paid on the debt is deducted from the firm's taxable income.

$$ The interest paid on the debt is taxed at the capital gains tax rate.

$$ The full value of the debt is deducted from the firm's taxable income.

What creates a book$-$tax difference that must be reconciled on a Schedule M$-1$ or Schedule M$-3$ for a corporation?

$$ Salaries paid to shareholder employees

$$ Bonuses paid to employees

$$ Meal expenses incurred in a lunch meeting during which bus