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- This file ACC 455 Week 3 Discussion Question 1 includes solutions to the following task: "How does a corporation compute earnings and profits (EP)? What income is deferred to a later year when computing taxable income but is included in EP in the current year? What deductions are allowed for taxable income purposes but denied for EP?"
- General Questions - General General Questions
- 1) Which of the following statements regarding proposed regulations is not correct?
- A. Proposed and temporary regulations are generally issued simultaneously.
- B. Proposed regulations do not provide any insight into the IRS's interpretation of the tax law.
- C. Proposed regulations expire after 3 years.
- D. Practitioners and other interested parties may comment on proposed regulations.
- 2) Regulations are
- A. presumed to be valid and to have almost the same weight as the IRC
- B. equal in authority to legislation if interpretative
- C. equal in authority to legislation
- D. equal in authority to legislation if statutory
- 3) Which of the following courts is not a trial court for tax cases?
- A. U.S. Tax Court
- B. U.S. Court of Federal Claims
- C. U.S. Bankruptcy Court
- D. U.S. District Court
- 4) Which of the following statements is incorrect?
- A. Limited partners' liability for partnership debt is limited to their amount of investment.
- B. In a general partnership, all partners have unlimited liability for partnership debts.
- C. In a limited partnership, all partners participate in managerial decision-making.
- D. All of the statements are correct.
- 5) Which of the following is an advantage of a sole proprietorship over other business forms?
- A. Low tax rates on dividends
- B. Ease of formation
- C. Tax-exempt treatment of fringe benefits
- D. The deduction for compensation paid to the owner
- 6) Which of the following statements is correct?
- A. S shareholders are taxed on their proportionate share of earnings that are distributed.
- B. S shareholders are taxed on their proportionate share of earnings whether or not distributed.
- C. An owner of a C corporation is taxed on his or her proportionate share of earnings.
- D. S shareholders are only taxed on distributions.
- 7) Three members form an LLC in the current year. Which of the following statements is incorrect?
- A. The LLC can elect to be taxed as a C corporation with no special tax consequences.
- B. If the LLC elects to use its default classification, it can elect to change its status to being taxed as a C corporation beginning with the third tax year after the initial classification.
- C. The LLC's default classification under the check-the-box rules is as a partnership.
- D. The LLC can elect to have its default classification ignored.
- 8) Identify which of the following statements is true.
- A. Under the check-the-box regulations, an LLC that has one member (owner) may be disregarded as an entity separate from its owner.
- B. An unincorporated business may not be taxed as a corporation.
- C. A new LLC that is owned by four members elects to be taxed under its default classification (as a partnership) in its first year of operations. The entity is prohib
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