Regulations are | A. equal in authorityto legislation if statutory | | B. equal in authorityto legislation | | C. presumed to bevalid and to have almost the same weight as the IRC | | D. equal in authorityto legislation if interpretative | | |
2) Which of the followingstatements regarding proposed regulations is not correct? | A. Practitioners andother interested parties may comment on proposed regulations. | | B. Proposedregulations expire after 3 years. | | C. Proposed andtemporary regulations are generally issued simultaneously. | | D. Proposedregulations do not provide any insight into the IRS'sinterpretation of the tax law. | | |
3) Identify which of thefollowing statements is false. | A. Members from boththe House and the Senate are on the Conference Committee. | | B. When tax advisorsspeak of the tax law, they usually have in mind just the InternalRevenue Code. | | C. Records ofcommittee hearings are helpful in determining Congressionalintent. | | D. All arefalse. | | |
4) Which of the followingstatements about a partnership is true? | A. Partners are taxedon distributions from a partnership. | | B. A partnership is ataxpaying entity. | | C. Partners are taxedon their allocable share of income whether it is distributed ornot. | | D. Partners areconsidered employees of the partnership. | | |
5) Which of the followingstatements is incorrect? | A. The number of Scorporation shareholders is unlimited. | | B. S corporationsmust allocate income and expenses to their shareholders based ontheir proportionate ownership interest. | | C. S corporationincome is taxed to shareholders when earned. | | D. S corporationlosses can offset shareholder income from other sources. | | |
6) Which of the followingstatements is incorrect? | A. Limited partners'liability for partnership debt is limited to their amount ofinvestment. | | B. In a generalpartnership, all partners have unlimited liability for partnershipdebts. | | C. In a limitedpartnership, all partners participate in managerialdecision-making. | | D. All of thestatements are correct. | | |
7) Three members form an LLC inthe current year. Which of the following statements is incorrect? | A. The LLC can electto have its default classification ignored. | | B. The LLC's defaultclassification under the check-the-box rules is as apartnership. | | C. The LLC can electto be taxed as a C corporation with no special taxconsequences. | | D. If the LLC electsto use its default classification, it can elect to change itsstatus to being taxed as a C corporation beginning with the thirdtax year after the initial classification. | | |
8) Identify which of thefollowing statements is false. | A. Under thecheck-the-box regulations, an LLC that has only two members(owners) must be taxed as a partnership. | | B. The check-the-boxregulations permit an LLC to be taxed as a C corporation. | | C. A business neednot be incorporated under state or federal law to be taxed as acorporation. | | D. Once an electionis made to change its classification, an entity cannot change againfor 60 months. | | |
9) Identify which of thefollowing statements is true. | A. The check-the-boxregulations permit an LLC to be taxed as a C corporation. | | B. Under thecheck-the-box regulations, an LLC that has only two members(owners) default classification is as a partnership. | | C. Once an electionis made to change its classification, an entity cannot change againfor 60 months. | | D. All of thestatements are true. | | |
10) For Sec. 351 purposes theterm property does not include | A. accountsreceivable | | B. cash | | C. inventory | | D. servicesrendered | | |
11) Identify which of thefollowing statements is true. | A. The exchange ofstock for services rendered is not a taxable transaction. | | B. The repeal of Sec.351 would result in more existing businesses beingincorporated. | | C. Section 351 wasenacted to allow taxpayers to incorporate without incurring adversetax consequences. | | D. All arefalse. | | |
12) Barry, Dan, and Edithtogether form a new corporation; Barry and Dan each contributeproperty in exchange for stock. Within 2 weeks after the formation,the corporation issues additional stock to Edith in exchange forproperty. Barry and Dan each hold 10,000 shares and Edith willreceive 9,000 shares. Which transactions will qualify fornonrecognition? | A. Only the secondtransaction will qualify for nonrecognition. | | B. Only the firsttransaction will qualify for nonrecognition. | | C. Because of thestep transaction doctrine neither transaction will qualify. | | D. Both transactionswill qualify under Sec. 351 if they are part of the same plan ofincorporation. | |