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Exam 4: Business Entities Overview

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Question 51

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From a tax perspective, which entity choice is preferred when a liquidating distribution occurs and the entity has appreciated assets?

A) Partnership
B) S corporation
C) C corporation
D) Both S corporation and C corporation

E) A) and B)
F) None of the above

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Question 52

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Which of the following statements is true for a C corporation incurring a NOL for a tax year that begins in 2020?

A) It may carry the NOL back two years and forward 20 years.
B) It may not carry the NOL back to prior years but it may carry it forward 20 years.
C) It may not carry the NOL back to prior years but it can carry the loss forward indefinitely.
D) It may carry the loss back two years and carry the loss forward indefinitely.
E) None of the choices is correct.

F) C) and D)
G) A) and E)

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Question 53

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The excess loss limitations apply to owners of all of the following entities except which of the following (answer for tax years other than 2020) ?

On which tax form does a single-member LLC with one individual owner report its income and losses?

A Corporation owns 10 percent of D Corporation. D Corporation earns a total of $200 million before taxes in the current year, pays corporate tax on this income, and distributes the remainder proportionately to its shareholders as a dividend. In addition, A Corporation owns 40 percent of Partnership P. Partnership P earns $500 million in the current year. Given this fact pattern, answer the following questions: a. How much cash from the D Corporation dividend remains for A Corporation after A pays the tax on the dividend, assuming A Corporation is eligible for the 50 percent dividends received deduction? b. If Partnership P distributes all of its current-year earnings in proportion to the partner's ownership percentages, how much cash from Partnership P does A Corporation have after paying taxes on its share of income from the partnership? c. If you were to replace A Corporation with Individual A [marginal tax rate on ordinary income is 37 percent and on qualified dividends is 23.8 percent (including the net investment income tax)] in the original fact pattern above, how much cash does Individual A have from the D Corporation dividend after all taxes, assuming the dividends are qualified dividends? Consistent with the original facts, assume that D Corporation distributes all of its after-tax income to its shareholders.

What is the tax impact to a C corporation or an S corporation when it makes a (noncash) property distribution to a shareholder?

Rodger owns 100percent of the shares in Trevor Incorporated a C corporation. Assume the following for the current year: Given these assumptions, how much cash does Rodger have from the dividend after paying taxes on the distribution? (Round your intermediate calculations and final answer to whole number dollar amount.)