(1) You are encouraged to use your book and your motes for this te (2) The exam
ID: 2556757 • Letter: #
Question
(1) You are encouraged to use your book and your motes for this te (2) The exam is due back to me at the end of class on Tuesday 3, 2018 (3) Partial credit will be allowed i (4) Assume that the corporations in thequestions are all C corporations unless specifically only rare circumstances stated 5) Read all answers and make sure that your selection is the BEST answer for multiple )The questions are worth 2 points each. Your core will no. enood-grade of 0% Juanita owns 45% of mek in a Ccoperation that had a profi" of S120,000 in 2017. enos owns . interest in a partnership that had a of S120,000 during the year. The corporation atine o nta, and the partnership distributed $20,000 to Carlos. Which of the following statements a Jusnita must repot 520,000 distribution income from the corporation. h. The corporation must pay tax on $120,000 of income e. Carlos must repont $20,000 of income from the partnership d.The partmnership is not subject to a Federal entity-level ineome tax e. None of the above earned $200,000 in 2017. He also owns 10% of the Born owns a 35% interest in an S corporation that stock in 2. a C ooporation that earned s200,000 during the year. The S corporation distributed $10,000 to Biorn and the C corporation paid dividends of $10,000 to Bjorn. How much income must Bjorn report a. $0 income from the S corporation and so income from the C corporation. b. S10,000 income from the S corporation and $10,000 income from the C corporation. from these businesses? d. $70,000 income from the S corporation and $10,000 of dividend income from the C corporation e None of the above. 3. Ted is the sole shareholder of a C corporation, and Sue owns a sole proprietorship. Both businesses Which of the foll started in 2017, and each business sustained a S5,000 net capital loss for the year. statements is correct? a. Ted's corporation can deduct the $5,000 capital loss in 2017 b. Ted's corporation can deduct $3,000 of the capital loss in 2017 Sue can carry the capital loss back three years and forward five years. c. d. Sue can deduct the $5,000 capital loss against ordinary income in 2017. e. None of the above.Explanation / Answer
1. c. Carlos must report $20000 of income from partnership.
In partnership, each partner needs to report their share of income in Form 1040.
2. d. $70000 income from the S corporation and $10000 of dividend income from the C corporation
S corporation generally escape income tax at corporate level, It is not subject to Federal Income tax, Instead Shareholders are taxed upon their allocated share of income.
S corporation's income $200,000
Bjorn share 35% $70000
C corporation is taxed at corporate level, so the shareholder only get taxed if dividens are distributed to them by the company.
3. e. None of the above.
Net capital loss of C corporation can not be offset against ordinary income of C corporation. Instead, it can carryback capital loss to offset against capital gain for 3 years and carryforward for 5 years.
A sole proprietor can offset net capital loss upto $3000 of ordinary income and remaining loss can be carried forward to future period for offseting.
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