ACC 455 Final Exam
1) Which of the following statements regarding proposed regulations is not correct?
A. Proposed & temporary regulations are generally issued simultaneously.
B. Proposed regulations do not provide any insight into the IRS's interpretation of the tax law.
C. Proposed regulations expire after 3 years.
D. Practitioners & other interested parties may comment on proposed regulations.
2) Regulations are
A. presumed to be valid & to have almost the same weight as the IRC
B. equal in authority to legislation if interpretative
C. equal in authority to legislation
D. equal in authority to legislation if statutory
3) Which of the following courts is not a trial court for tax cases?
A. U.S. Tax Court
B. U.S. Court of Federal Claims
C. U.S. Bankruptcy Court
D. U.S. District Court
4) Which of the following statements is incorrect?
A. Limited partners' liability for partnership debt is limited to their amount of investment.
B. In a general partnership, all partners have unlimited liability for partnership debts.
C. In a limited partnership, all partners participate in managerial decision-making.
D. All of the statements are correct.
5) Which of the following is an advantage of a sole proprietorship over other business forms?
A. Low tax rates on dividends
B. Ease of formation
C. Tax-exempt treatment of fringe benefits
D. The deduction for compensation paid to the owner
6) Which of the following statements is correct?
A. S shareholders are taxed on their proportionate share of earnings that are distributed.
B. S shareholders are taxed on their proportionate share of earnings whether or not distributed.
C. An owner of a C corporation is taxed on his or her proportionate share of earnings.
D. S shareholders are only taxed on distributions.
7) Three members form an LLC in the current year. Which of the following statements is
incorrect?
A. The LLC can elect to be taxed as a C corporation with no special tax consequences.
B. If the LLC elects to use its default classification, it can elect to change its status to being taxed
as a C corporation beginning with the third tax year after the initial classification.
C. The LLC's default classification under the check-the-box rules is as a partnership.
D. The LLC can elect to have its default classification ignored.
, 8) Identify which of the following statements is true.
A. Under the check-the-box regulations, an LLC that has one member (owner) may be
disregarded as an entity separate from its owner.
B. An unincorporated business may not be taxed as a corporation.
C. 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. The entity is prohibited from changing its tax
classification at any time in the future.
D. All are false.
9) Identify which of the following statements is true.
A. The check-the-box regulations permit an LLC to be taxed as a C corporation.
B. Under the check-the-box regulations, an LLC that has only two members (owners) default
classification is as a partnership.
C. Once an election is made to change its classification, an entity cannot change again for 60
months.
D. All of the statements are true.
10) Rose & Wayne form a new corporation. Rose contributes cash for 85% of the stock &
Wayne contributes services for 15% of the stock. The tax effect is
A. Rose & Wayne are not required to recognize their realized gains.
B. Wayne must report the FMV of the stock received as capital gain.
C. Rose & Wayne must recognize their realized gains, if any.
D. Wayne must report the FMV of the stock received as ordinary income.
11) Matt & Sheila form Krupp Corporation. Matt contributes property with a FMV of $55,000 &
a basis of $35,000. Sheila contributes property with a FMV of $75,000 & a basis of $40,000.
Matt sells his stock to Paul shortly after the exchange. The transaction will
A. qualify with respect to Sheila under Sec. 351 whether Matt qualifies or not
B. qualify under Sec. 351 if Matt can show the sale to Paul was not part of a prearranged plan
C. not qualify under Sec. 351
D. qualify under Sec. 351 only if an advance ruling has been obtained
12) For Sec. 351 purposes the term property does not include
A. inventory
B. accounts receivable
C. cash
D. services rendered
13) Identify which of the following statements is true.
A. In computing an NOL for the current year, a deduction is allowed for NOLs from previous
years.
B. An election to forgo an NOL carryback must be made on or before the return due date
(including extensions) for the year in which the NOL is incurred.
C. A corporate NOL can be carried back 2 years & forward 15 years.
D. All are false.
1) Which of the following statements regarding proposed regulations is not correct?
A. Proposed & temporary regulations are generally issued simultaneously.
B. Proposed regulations do not provide any insight into the IRS's interpretation of the tax law.
C. Proposed regulations expire after 3 years.
D. Practitioners & other interested parties may comment on proposed regulations.
2) Regulations are
A. presumed to be valid & to have almost the same weight as the IRC
B. equal in authority to legislation if interpretative
C. equal in authority to legislation
D. equal in authority to legislation if statutory
3) Which of the following courts is not a trial court for tax cases?
A. U.S. Tax Court
B. U.S. Court of Federal Claims
C. U.S. Bankruptcy Court
D. U.S. District Court
4) Which of the following statements is incorrect?
A. Limited partners' liability for partnership debt is limited to their amount of investment.
B. In a general partnership, all partners have unlimited liability for partnership debts.
C. In a limited partnership, all partners participate in managerial decision-making.
D. All of the statements are correct.
5) Which of the following is an advantage of a sole proprietorship over other business forms?
A. Low tax rates on dividends
B. Ease of formation
C. Tax-exempt treatment of fringe benefits
D. The deduction for compensation paid to the owner
6) Which of the following statements is correct?
A. S shareholders are taxed on their proportionate share of earnings that are distributed.
B. S shareholders are taxed on their proportionate share of earnings whether or not distributed.
C. An owner of a C corporation is taxed on his or her proportionate share of earnings.
D. S shareholders are only taxed on distributions.
7) Three members form an LLC in the current year. Which of the following statements is
incorrect?
A. The LLC can elect to be taxed as a C corporation with no special tax consequences.
B. If the LLC elects to use its default classification, it can elect to change its status to being taxed
as a C corporation beginning with the third tax year after the initial classification.
C. The LLC's default classification under the check-the-box rules is as a partnership.
D. The LLC can elect to have its default classification ignored.
, 8) Identify which of the following statements is true.
A. Under the check-the-box regulations, an LLC that has one member (owner) may be
disregarded as an entity separate from its owner.
B. An unincorporated business may not be taxed as a corporation.
C. 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. The entity is prohibited from changing its tax
classification at any time in the future.
D. All are false.
9) Identify which of the following statements is true.
A. The check-the-box regulations permit an LLC to be taxed as a C corporation.
B. Under the check-the-box regulations, an LLC that has only two members (owners) default
classification is as a partnership.
C. Once an election is made to change its classification, an entity cannot change again for 60
months.
D. All of the statements are true.
10) Rose & Wayne form a new corporation. Rose contributes cash for 85% of the stock &
Wayne contributes services for 15% of the stock. The tax effect is
A. Rose & Wayne are not required to recognize their realized gains.
B. Wayne must report the FMV of the stock received as capital gain.
C. Rose & Wayne must recognize their realized gains, if any.
D. Wayne must report the FMV of the stock received as ordinary income.
11) Matt & Sheila form Krupp Corporation. Matt contributes property with a FMV of $55,000 &
a basis of $35,000. Sheila contributes property with a FMV of $75,000 & a basis of $40,000.
Matt sells his stock to Paul shortly after the exchange. The transaction will
A. qualify with respect to Sheila under Sec. 351 whether Matt qualifies or not
B. qualify under Sec. 351 if Matt can show the sale to Paul was not part of a prearranged plan
C. not qualify under Sec. 351
D. qualify under Sec. 351 only if an advance ruling has been obtained
12) For Sec. 351 purposes the term property does not include
A. inventory
B. accounts receivable
C. cash
D. services rendered
13) Identify which of the following statements is true.
A. In computing an NOL for the current year, a deduction is allowed for NOLs from previous
years.
B. An election to forgo an NOL carryback must be made on or before the return due date
(including extensions) for the year in which the NOL is incurred.
C. A corporate NOL can be carried back 2 years & forward 15 years.
D. All are false.
