Professionale t Taxe t Preparer,e t Modulee t 3e t practicee t ex
am
1. Retainedetearningsetare:etCorporateetincomeetthatethasetnotetbeenetdistributedettoetshareholders
2. Asetaetcharacteristicetofetcorporations,ettheet'continuityetofetlife'etconceptetrefersetto:et-
Whenetaetcorporationetisetdissolvedetoretinsolvent
3. Arthure t purchasede t ae t businesse t fore t $250,000e t whiche t includede t $100,000e t ine t go
od-
will.e t Howe t longe t ae t periode t ise t Arthure t authorizede t toe t amortizee t thee t goodwille t ove
et
r?:e t -etStraight-lineetdepreciationetoveret180etmonths.
4. Francise t ande t Samanthae t aree t ownerse t ofe t separatee t commerciale t officee t building
inetdifferentetcities.etThroughetaetthirdetpartyetcommercialetrealetestateetagency,eteach
earnedetthatettheetotherethadetanetinterestetinetswappingetofficeetbuildings.etFrancisetag
eedettoetpayetSamanthaetanetadditionalet$100,000etforetheretbuilding.etBeforeettheetswa
,etFrancis'setbasisetinetheretbuildingetwaset$150,000,etandetSamantha'setbasisetinetheretbuild
ngetwaset$225,000.etWhatetwilletFrancis'setbasisetbeetinetheretnewetbuilding?:et$250,000
5. Aetcorporationetshouldetfileetwhichetofettheetfollowingetforms?:etFormet1120
6. Taxpayersetareetallowedettoetrecoverettheetcostetofetgoodwilletandetcopyrightsetacquired
e t afteretAugustet10,et1993,etthrough:etAmortizationetoveret15etyears
7. Theettermet"boot"etasetitetpertainsettoetlike-
, Professionale t Taxe t Preparer,e t Modulee t 3e t practicee t ex
am
kindetexchangesetrefersettoetwhat?:etTheetcashetpaidetbyetoneetpartyettoettheetother
8. Idae t ande t Susane t formede t ae t corporatione t toe t begine t ae t tanninge t business.e t Idae t investe
$100,000etofetheretownetmoney,etandetSusanetinvestedetaetbuildingetforetwhichetsheetha
detaettaxetbasisetofet$75,000,etandetwhichethadetaetfairetmarketetvalueetofet$150,000.etEa
chetreceivedet50,000etsharesetofetstocketandetSusanetalsoetreceivedet$25,000etinetcash.etW
hatetisetSusan'setbasisetinetheret50,000etshares?:et$50,000
9. Richarde t paide t $6,800e t ine t legale t feese t toe t starte t hise t newe t Se t corporation.e t Howe t mu
che t ofetthise t investmente t maye t hee t deducte t ine t thee t firste t yeare t ase t organizationale t cost
s?:e t $5,120
10. Whichetofettheetfollowingetisetaetcharacteristicetofetaetlike-
kindetexchange?:etBothettheetsurrenderedetandetreplacementetpropertyetmustetbeetheldetforetproductiveetuseet
inetaettradeetoretbusinessetoretforetinvestment
11. WhichetofettheetfollowingetitemsetshouldetNOTetbeetincludedetinettheetcostetofetgoo
dsetsoldetforetaetmanufactureretwhoseetannualetsalesetareet$28etmillion?:etItemsetwithdrawnet
foretpersonaletuse
12. Thee t balancee t sheete t providese t whiche t ofe t thee t followinge t accounte t balances?:e t A
ets
13. TRUEetORetFALSE:etAetsoleetproprietorshipetisetanetunincorporatedetorganization
, Professionale t Taxe t Preparer,e t Modulee t 3e t practicee t ex
am
etcomposed etofetoneetoretmoreetpersonsetwhoetcarriesetonetaettradeetoretbusiness.: etFalsee
-
t
, Professionale t Taxe t Preparer,e t Modulee t 3e t practicee t ex
am
Byetdefinition,etaetsoleetproprietorshipetisetcomposedetofetonlyetoneetperson.etAetsimilaretentityetwithettwoetoretmoreetpersons
et wouldetbeetaetpartnership.
14. Whiche t ofe t thee t followinge t ise t note t ae t characteristice t ofe t ae t solee t proprietorship?:e t A)
ole
proprietorshipsetareettaxedetonlyetonettheiretnetetprofits.etSoleetproprietors,etasetindividualettaxpayers,etpayetincomeettaxesetonettheet
netetprofitsetofettheiretbusiness.etButettheetproprietorshipetitselfetdoesetnotetexistetasetaetseparateetentityetfrometitsetowner,etandet
thereforeethasetnoettaxetliability.
15. TRUEetORetFALSE:etIfetaethusbandetandetwifeetwishettoetoperateetaetbusinessettogether,
theyetmayetformetaetQualifiedetJointetVenture,etoretQJV,etinsteadetofetaetpartnership.:etTrueet-
e t Currentettaxetlawetallowsethusbandsetandetwivesettoetelectetnotettoetformetaetpartnership.etInstead,ettheyetdeclareetthemselve
setaetQJVetandetfileettwoetseparateetScheduleetCsetoretScheduleetFsettoetreportettheiretsharesetofetincomeetandetexpenseset(asetlonget
asettheetentityetisetnotetanetLLC).
16. Partnershipse t muste t filee t whiche t taxe t forme t toe t reporte t theire t nete t profite t ore t loss?:
Form
1065et-etCorrect.etHowever,etFormet1065etisetanetinformation-
onlyetreturn,etandeteachetpartneretmustetincludeethisetshareetofetpartnershipetprofitetoretlossetonethisetindividualetFormet1040.
17. TRUEe t ORe t FALSE:e t Ae t partnershipe t cane t electe t toe t bee t taxede t ase t ane t Se t corporation.:e t
rue
am
1. Retainedetearningsetare:etCorporateetincomeetthatethasetnotetbeenetdistributedettoetshareholders
2. Asetaetcharacteristicetofetcorporations,ettheet'continuityetofetlife'etconceptetrefersetto:et-
Whenetaetcorporationetisetdissolvedetoretinsolvent
3. Arthure t purchasede t ae t businesse t fore t $250,000e t whiche t includede t $100,000e t ine t go
od-
will.e t Howe t longe t ae t periode t ise t Arthure t authorizede t toe t amortizee t thee t goodwille t ove
et
r?:e t -etStraight-lineetdepreciationetoveret180etmonths.
4. Francise t ande t Samanthae t aree t ownerse t ofe t separatee t commerciale t officee t building
inetdifferentetcities.etThroughetaetthirdetpartyetcommercialetrealetestateetagency,eteach
earnedetthatettheetotherethadetanetinterestetinetswappingetofficeetbuildings.etFrancisetag
eedettoetpayetSamanthaetanetadditionalet$100,000etforetheretbuilding.etBeforeettheetswa
,etFrancis'setbasisetinetheretbuildingetwaset$150,000,etandetSamantha'setbasisetinetheretbuild
ngetwaset$225,000.etWhatetwilletFrancis'setbasisetbeetinetheretnewetbuilding?:et$250,000
5. Aetcorporationetshouldetfileetwhichetofettheetfollowingetforms?:etFormet1120
6. Taxpayersetareetallowedettoetrecoverettheetcostetofetgoodwilletandetcopyrightsetacquired
e t afteretAugustet10,et1993,etthrough:etAmortizationetoveret15etyears
7. Theettermet"boot"etasetitetpertainsettoetlike-
, Professionale t Taxe t Preparer,e t Modulee t 3e t practicee t ex
am
kindetexchangesetrefersettoetwhat?:etTheetcashetpaidetbyetoneetpartyettoettheetother
8. Idae t ande t Susane t formede t ae t corporatione t toe t begine t ae t tanninge t business.e t Idae t investe
$100,000etofetheretownetmoney,etandetSusanetinvestedetaetbuildingetforetwhichetsheetha
detaettaxetbasisetofet$75,000,etandetwhichethadetaetfairetmarketetvalueetofet$150,000.etEa
chetreceivedet50,000etsharesetofetstocketandetSusanetalsoetreceivedet$25,000etinetcash.etW
hatetisetSusan'setbasisetinetheret50,000etshares?:et$50,000
9. Richarde t paide t $6,800e t ine t legale t feese t toe t starte t hise t newe t Se t corporation.e t Howe t mu
che t ofetthise t investmente t maye t hee t deducte t ine t thee t firste t yeare t ase t organizationale t cost
s?:e t $5,120
10. Whichetofettheetfollowingetisetaetcharacteristicetofetaetlike-
kindetexchange?:etBothettheetsurrenderedetandetreplacementetpropertyetmustetbeetheldetforetproductiveetuseet
inetaettradeetoretbusinessetoretforetinvestment
11. WhichetofettheetfollowingetitemsetshouldetNOTetbeetincludedetinettheetcostetofetgoo
dsetsoldetforetaetmanufactureretwhoseetannualetsalesetareet$28etmillion?:etItemsetwithdrawnet
foretpersonaletuse
12. Thee t balancee t sheete t providese t whiche t ofe t thee t followinge t accounte t balances?:e t A
ets
13. TRUEetORetFALSE:etAetsoleetproprietorshipetisetanetunincorporatedetorganization
, Professionale t Taxe t Preparer,e t Modulee t 3e t practicee t ex
am
etcomposed etofetoneetoretmoreetpersonsetwhoetcarriesetonetaettradeetoretbusiness.: etFalsee
-
t
, Professionale t Taxe t Preparer,e t Modulee t 3e t practicee t ex
am
Byetdefinition,etaetsoleetproprietorshipetisetcomposedetofetonlyetoneetperson.etAetsimilaretentityetwithettwoetoretmoreetpersons
et wouldetbeetaetpartnership.
14. Whiche t ofe t thee t followinge t ise t note t ae t characteristice t ofe t ae t solee t proprietorship?:e t A)
ole
proprietorshipsetareettaxedetonlyetonettheiretnetetprofits.etSoleetproprietors,etasetindividualettaxpayers,etpayetincomeettaxesetonettheet
netetprofitsetofettheiretbusiness.etButettheetproprietorshipetitselfetdoesetnotetexistetasetaetseparateetentityetfrometitsetowner,etandet
thereforeethasetnoettaxetliability.
15. TRUEetORetFALSE:etIfetaethusbandetandetwifeetwishettoetoperateetaetbusinessettogether,
theyetmayetformetaetQualifiedetJointetVenture,etoretQJV,etinsteadetofetaetpartnership.:etTrueet-
e t Currentettaxetlawetallowsethusbandsetandetwivesettoetelectetnotettoetformetaetpartnership.etInstead,ettheyetdeclareetthemselve
setaetQJVetandetfileettwoetseparateetScheduleetCsetoretScheduleetFsettoetreportettheiretsharesetofetincomeetandetexpenseset(asetlonget
asettheetentityetisetnotetanetLLC).
16. Partnershipse t muste t filee t whiche t taxe t forme t toe t reporte t theire t nete t profite t ore t loss?:
Form
1065et-etCorrect.etHowever,etFormet1065etisetanetinformation-
onlyetreturn,etandeteachetpartneretmustetincludeethisetshareetofetpartnershipetprofitetoretlossetonethisetindividualetFormet1040.
17. TRUEe t ORe t FALSE:e t Ae t partnershipe t cane t electe t toe t bee t taxede t ase t ane t Se t corporation.:e t
rue
