business Entity Selection and Taxation with correct question and answers

Business Entity Selection and
Taxation with correct question
and answers




usr
[COMPANY NAME] [Company address]

,1. On August 1, Jack bought a 5 percent interest (5 shares) in XYZ,
an S corpora- tion that files as a calendar-year taxpayer. In the same
year in which the interest in the S Corporation was acquired, the
business generated $160,000 of net income. How much business
income will be reported to Jack on his current-year Schedule K-1?
$0
$3,333
$3,353
$8,000 Answer: $3,353

Jack only had his shares for 153 days of the year (from August 1 to December 31), so he would only need
to report income for 153 days.
($160,000 × 5%) × (153 ÷ 365) = $3,353
2. Which entity will meet the following
requirements? The entity is a flow-through
entity.
The entity has limited liability.
The entity can have foreign investors.

A
proprietorship
A partnership
An LLC
An S corporation Answer: An LLC

Proprietorships and partnerships have unlimited liability. S corporations cannot have foreign investors. An
LLC, however, is a flow-through entity, has limited liability, and can have foreign investors.
3. Which entity will meet the following
requirements? It is a disregarded entity.
The entity has limited liability.
There is self-employment tax on all



, income. A general partnership