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ACC330 Exam Questions And Answers
|Latest 2025 | Guaranteed Pass.
Loretta is the sole shareholder of Country Collectibles, a calendar year S corporation. Although
Loretta spends at least 40 hours per week supervising Country Collectible's employees, she has
never drawn a salary from the business. Country Collectibles has been in existence for five years
and has earned a profit every year. Loretta withdraws $100,000 cash from the S corporation
each year. Which of the following statements accurately describes the tax consequences of
these withdrawals?
A. There is significant risk that the IRS could recharacterize the payments to Loretta as salary.
Such treatment would not change taxable income for Loretta and reduce taxable income of the
S corporation.
B. There is significant risk that the IRS could recharacterize the payments to Loretta as salary.
Such treatment would increase taxable income for both Loretta and the S corporation.
C. The withdrawals are considered taxable divide - Answer✔A
Which of the following statements about partnerships is false?
A. A partnership is a legal entity that may enter into valid contracts.
B. Partnerships are unincorporated entities.
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C. Only individuals may be partners in a partnership.
D. Partnerships are sometimes referred to as passthrough entities since they do not pay federal
income tax. - Answer✔C
Which of the following statements regarding the home office deduction is true?
A. The home office deduction is limited to the taxable income of the business before the
deduction.
B. A home office deduction is not allowed for using the home office for administrative or
management activities only.
C. A depreciation deduction is not allowed for a home office.
D. In order to qualify for the deduction, a portion of the taxpayer's home must be used
regularly and exclusively to meet with clients or customers. - Answer✔A
Which of the following statements regarding limited liability companies is true?
A. Because LLCs are a relatively new organizational form, many tax questions concerning their
operation have yet to be resolved.
B. Just like an S corporation, an LLC member's share of ordinary income is not subject to self-
employment taxes.
C. Just like a limited partnership, only LLC members who are not actively involved in the entity's
business activities have limited liability for the LLC's debts.
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D. Just like an S corporation, an LLC is restricted to 100 members. - Answer✔A
Perry is a partner in a calendar year partnership. His Schedule K-1 for the current tax year
showed the following:
Ordinary business loss
$(20,000)
Short-term capital gain
2,100
Dividend income
1,600
Cash distribution
5,800
Perry's tax basis in his partnership interest at the beginning of the year was $15,400. How much
of the ordinary loss may he deduct on his Form 1040? Assume the excess business loss
limitation does not apply.
A. $14,000
B. $11,700
C. $10,200
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ACC330 Exam Questions And Answers
|Latest 2025 | Guaranteed Pass.
Loretta is the sole shareholder of Country Collectibles, a calendar year S corporation. Although
Loretta spends at least 40 hours per week supervising Country Collectible's employees, she has
never drawn a salary from the business. Country Collectibles has been in existence for five years
and has earned a profit every year. Loretta withdraws $100,000 cash from the S corporation
each year. Which of the following statements accurately describes the tax consequences of
these withdrawals?
A. There is significant risk that the IRS could recharacterize the payments to Loretta as salary.
Such treatment would not change taxable income for Loretta and reduce taxable income of the
S corporation.
B. There is significant risk that the IRS could recharacterize the payments to Loretta as salary.
Such treatment would increase taxable income for both Loretta and the S corporation.
C. The withdrawals are considered taxable divide - Answer✔A
Which of the following statements about partnerships is false?
A. A partnership is a legal entity that may enter into valid contracts.
B. Partnerships are unincorporated entities.
1|P a g e
, ©BRIGHTSTARS 2025 ALL RIGHTS RESERVED 1:26 PM A+
C. Only individuals may be partners in a partnership.
D. Partnerships are sometimes referred to as passthrough entities since they do not pay federal
income tax. - Answer✔C
Which of the following statements regarding the home office deduction is true?
A. The home office deduction is limited to the taxable income of the business before the
deduction.
B. A home office deduction is not allowed for using the home office for administrative or
management activities only.
C. A depreciation deduction is not allowed for a home office.
D. In order to qualify for the deduction, a portion of the taxpayer's home must be used
regularly and exclusively to meet with clients or customers. - Answer✔A
Which of the following statements regarding limited liability companies is true?
A. Because LLCs are a relatively new organizational form, many tax questions concerning their
operation have yet to be resolved.
B. Just like an S corporation, an LLC member's share of ordinary income is not subject to self-
employment taxes.
C. Just like a limited partnership, only LLC members who are not actively involved in the entity's
business activities have limited liability for the LLC's debts.
2|P a g e
, ©BRIGHTSTARS 2025 ALL RIGHTS RESERVED 1:26 PM A+
D. Just like an S corporation, an LLC is restricted to 100 members. - Answer✔A
Perry is a partner in a calendar year partnership. His Schedule K-1 for the current tax year
showed the following:
Ordinary business loss
$(20,000)
Short-term capital gain
2,100
Dividend income
1,600
Cash distribution
5,800
Perry's tax basis in his partnership interest at the beginning of the year was $15,400. How much
of the ordinary loss may he deduct on his Form 1040? Assume the excess business loss
limitation does not apply.
A. $14,000
B. $11,700
C. $10,200
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