ACC 731 Exam 1 Questions and Answers 2022

ACC 731 Exam 1 Questions and Answers 2022C Corporation - ANSWER Subject to an entity-level Federal income tax, results in double tax S Corporation - ANSWER -Separate entity, only pays special taxes -Similar to partnership taxation, flow through taxation Nontax Issues in Selecting Entity Form - ANSWER -Liability -Capital-raising -Transferability -Continuity of life -Centralized management Limited Liability Companies (LLC) - ANSWER -allows owners to avoid unlimited liability (major nontax advantage) -treated as partnership for tax purposes, avoids double taxation (major tax advantage) Check-the-box Regulations - ANSWER -allows taxpayer to choose tax status of entity without regard to corporate or non corporate characteristics -entities with 1 owner can elect to be classified as partnership or corporation -entities with only 1 owner can elect to be classified as sole proprietorship or as corporation -election is not available to entities incorporated under state law or if required to be corp under fed law Charitable Contributions - Individuals - ANSWER -limited to 50% of AGI, 30% for capital gain property unless election is made to reduce FMV of gift -Excess charitable contribution carried over for 5 years -amount of contribution is the FMV of capital gain property; ordinary income property is limited to adjusted basis; capital gain property is treated as ordinary income property if certain tangible personalty is donated to a nonuse charity or a private non operating foundation is the donee -Time of deduction-year in which payment is made Charitable Contributions - Corporations - ANSWER -Limited in any tax year to 10% of taxable income computed w/o regard to the charitable contribution deduction, NOL carry back, capital loss carry back, dividends received deduction, and domestic production activities deduction -Excess of 10% limit can be carried over for 5 years This study source was downloaded by from CourseH on :11:44 GMT -06:00 t -Time of deduction-year in which payment is made unless accrual basis corp, allows deduction in year preceding payment if authorized by board of directors and paid within 2.5 months of year end Casualty Losses - Individuals - ANSWER $100 floor on personal casualty and theft losses; personal casualty losses deductible only to extent losses exceed 10% of AGI Casualty Losses - Corporations - ANSWER Deductible in full Net Operating Loss - Individual - ANSWER -Adjusted for several items, including nonbusiness deductions over nonbusiness income and personal exemptions -Carryback period is 2 years, while carry forward is 20 years Net Operating Loss - Corporations - ANSWER -No adjustments -Carryback 2 years, carry forward 20 Dividends Received Deduction - ANSWER 70%,80%, or 100% of dividends received depending on percentage of ownership by corporate shareholder Net Capital Gains - Individuals - ANSWER Taxed in full. generally 15 or 20% on net capital gains Net Capital Gains - Corporations - ANSWER taxed in full Capital Losses - Individuals - ANSWER Only $3000 of capital loss per year can offset ordinary income; unused loss is carried forward indefinitely to offset capital gains or ordinary income up to $3000; short-term and long-term carryovers retain their character Capital Losses - Corporations - ANSWER Can offset only capital gains; unused loss is carried back 3 years and forward 5; carryovers and carry backs are characterized as short-term losses Passive Losses - Individuals - ANSWER In general, passive losses cannon offset either active income or portfolio income Passive Losses - Corporations - ANSWER Passive loss rules apply to closely held C corps and personal service corps: -C corp- may offset active income, but not portfolio income -PSC- cannot offset either active income or portfolio income Domestic Production Activities Deduction - ANSWER Based on 9% of the lesser of qualified production activities income (QPAI) or modified AGI (individuals)/taxable income (corps)