1- A machine is purchases by a very profitable business in 2016 for $20,000. Thi
ID: 2541345 • Letter: 1
Question
1- A machine is purchases by a very profitable business in 2016 for $20,000. This amount can be
a. Depreciated under IRS guidelines
b. Fully deductible in 2016 under section 179
c. Both a and b
d. Capitalized, but no depreciation in 2016
1- Describe the following entities as
a. Subject to double taxation
b. Referred to as a “flow through: entity
c. Taxed directly to an individual
(For each, indicate only a, b or c)
i. C Corporation
ii. S Corporation
iii. Partnership
iv. Sole proprietorship
v. Single member LLC
vi. LLC electing partnership status
vii. LLC electing C Corporation status
1-The President and Congress are currently considering changes to the tax system. If passed the bill would:
a. Increase the tax rate on wealthy people
b. Decrease the tax rate for individuals and businesses
c. Eliminate certain deductions for individuals and the AMT for individuals
d. None of the above
e. Both b and c
1- CPA’s and other professionals are required to :
a. Follow IRS circular 230 and professional codes of ethics for their profession
b. Reduce the tax burden of their clients as much as they can – tax rules are irrelevant
c. Pay more taxes than their clients
d. Take continuous education courses every week throughout the year.
Explanation / Answer
1.
Answer: d
Since the business is highly profitable, charging depreciation during the year may reduce such profit substantially. This might be a manipulation of profit by the business. In order to prevent it, the depreciation amount may be deferred to the next year.
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