ACC 455 FINAL EXAM 3 | VERIFIED SOLUTION

ACC 455 FINAL EXAM 3 1) Identify which of following statements is false. A. Members from both House and Senate are on Conference Committee. B. When tax advisors speak of tax law, they usually have in mind just Internal Revenue Code. C. Records of committee hearings are helpful in determining Congressional intent. D. All are false. 2) Which of following courts is not a trial court for tax cases? A. U.S. District Court B. U.S. Court of Federal Claims C. U.S. Bankruptcy Court D. U.S. Tax Court 3) Term tax law includes A. legislation B. treasury regulations C. judicial decisions D. all of above 4) Which of following statements about a partnership is true? A. Partners are taxed on distributions from a partnership. B. Partners are considered employees of partnership. C. A partnership is a taxpaying entity. D. Partners are taxed on their allocable share of income whether it is distributed or not. 5) Which of following statements is incorrect? A. Limited partners' liability for partnership debt is limited to their amount of investment. . In a general partnership, all partners have unlimited liability for partnership debts. . In a limited partnership, all partners participate in managerial decision-making. . All of statements are correct. ) Which of following statements is correct? A. S shareholders are only taxed on distributions. . S shareholders are taxed on their proportionate share of earnings whether or not distributed. . An owner of a C corporation is taxed on his or her proportionate share of earnings. . S shareholders are taxed on their proportionate share of earnings that are distributed. ) Identify which of following statements is true. . Under check-the-box regulations, an LLC that has one member (owner) may be isregarded as an entity separate from its owner. . An unincorporated business may not be taxed as a corporation. . 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. entity is prohibited from changing its tax lassification at any time in future. . All are false. 8) Three members form an LLC in current year. Which of following statements is ncorrect? A. LLC can elect to have its default classification ignored. B. If LLC elects to use its default classification, it can elect to change its status to being taxed as a C corporation beginning with third tax year after initial classification. C. LLC's default classification under check-the-box rules is as a partnership. D. LLC can elect to be taxed as a C corporation with no special tax consequences. 9) Identify which of following statements is false. A. Under check-the-box regulations, an LLC that has only two members (owners) must be taxed as a partnership. B. Once an election is made to change its classification, an entity cannot change again for 60 months. C. check-the-box regulations permit an LLC to be taxed as a C corporation. D. A business need not be incorporated under state or federal law to be taxed as a corporation. 10) Barry, Dan, and Edith together form a new corporation; Barry and Dan each contribute property in exchange for stock. Within 2 weeks after formation, corporation issues additional stock to Edith in exchange for property. Barry and Dan each hold 10,000 shares and Edith will receive 9,000 shares. Which transactions will qualify for nonrecognition? A. Only second transaction will qualify for nonrecognition. B. Both transactions will qualify under Sec. 351 if they are part of same plan of incorporation. C. Only first transaction will qualify for nonrecognition. D. Because of step transaction doctrine neither transaction will qualify. 11) Identify which of following statements is true. A. A transferor's gain or loss that goes unrecognized when Sec. 351 applies is permanently exempt from taxation. B. If a taxpayer transfers property and services as part of a transaction meeting Sec. 351 requirements, all of stock received is counted in determining whether property transferors have acquired control. C. If a taxpayer transfers property and services as part of a transaction meeting Sec. 351 requirements, nonrecognition of gain or loss will apply to services. D. All are false. 12) Identify which of following statements is true. A. exchange of stock for services rendered is not a taxable transaction. B. repeal of Sec. 351 would result in more existing businesses being incorporated. C. Section 351 was enacted to allow taxpayers to incorporate without incurring adverse tax consequences. D. All are false. 13) Once a corporation has elected a taxable year it can change taxable year without IRS permission if A. resulting short period does not have a net operating loss . corporation has not changed its accounting period within last 10 years . annualized income for short period is at least 80% of corporation's income for preceding axable year . All of these 14) A new corporation may generally select one of following accounting methods with exception of A. accrual method . hybrid method . cash method . retail method 15) Identify which of following statements is true. A. A corporation that accrues compensation payable to an employee must pay amount within two and one-half months after close of taxable year to deduct amount in year of accrual. B. Accrued compensation that is deductible in year of accrual is considered to be part of an IRS deferred compensation plan. C. Accrued compensation not paid within three and one-half months after close of corporation tax year is deducted in year following accrual. D. All are false. 16) Island Corporation has following income and expense items for year. 18) Green Corporation is incorporated on March 1 and begins business on June 1. Green's first tax year ends on October 31, i.e., a short year. Green incurs following expenses during year: Date Type Amount February Draft charter $ 2,000 March Stock commission 30,000 March Accounting fees to set up books 2,000 April Temporary director fees 2,000 December Charter modification fee 1,000 What is deduction for organizational expenses if Green chooses to deduct its costs as soon as possible? A. $5,028 B. $667 C. $500 D. $36,000 19) Tax-exempt interest income on state and local municipal bonds which are not a private activity is A. a positive adjustment in calculating alternative minimum taxable income (AMTI) B. a negative adjustment in calculating alternative minimum taxable income (AMTI) C. included in calculating ACE (adjusted current earnings) D. a tax preference item 20) Which of following is not an adjustment in calculating AMTI? A. regular tax NOL deduction B. Production activities deduction C. difference between gains for AMTI and regular tax purposes D. Gain on installment sales of noninventory property 9. When 50 independent hardware stores formed a new business entity to provide them with services of wholesaler, this was an example of . a. wholesaler-sponsored voluntary chains b. retailer cooperatives c. franchise organizations d. catalog showrooms e. linked divisions 10. conflict involves conflict between members at same level within channel. a. Horizontal channel b. Direct channel c. Multichannel d. Vertical channel e. Single channel 11. Joe Montes hand-makes guitars and sells them to retailers and also recently began to sell them to final customer at . retailers aren’t happy about Internet sales because they claim direct marketing sales are adversely affecting their in-store sales. This is an example of conflict. a. horizontal channel b. direct channel c. multichannel d. vertical channel e. single channel 12. means having a skilled, neutral third party reconcile two parties’ interests. a. iplomacy b. Cooptation c. Goal subordination d. Arbitration e. Mediation Mini-Case 13-2 The Hanlon brothers of Minnesota decided to revive an extinct motorcycle brand, once-proud Excelsior-Henderson. They raised millions of dollars from stock sales and got state to subsidize them for millions more. They spent lots of raised money announcing future coming of bike, creating high awareness at rallies and race events. In 2000, after nearly 4 years of work, they introduced their first model , Big X, through test rides at Black Hills Rally in Sturgis, South Dakota, and at Laughlin River Run in Laughlin, Nevada. Interested buyers were shown maps with a small network of about 80 U.S. dealers who had agreed to stock bikes, and Hanlons promised more to come. However, purchasers who had interest and money to purchase hesitated about quality and stability of proposed dealership network and bike never sold enough units to keep company alive. Within months company went bankrupt, probably not due to a lack of good product, but rather due to a lack of good distribution.