Page |1
D557 Corporate Taxation Pre-Assessment
Questions and Correct Answers/ Latest
Update / Already Graded
An S Corporation forgoes it "S" status and becomes a "C" Corporation.
What is the tax consequence of this change on the shareholders of the
corporation?
1. Its shareholders will no longer pay self-employment tax on their
allocated income.
2. Its shareholders will no longer pay any taxes on distributions made
by the corporation.
3. Its shareholders will no longer be eligible for deductions for qualified
business income.
4. Its shareholders will no longer be eligible for dividend received
deduction for any receipt of distribution.
Ans: 3. Its shareholders will no longer be eligible for deductions
for qualified business income.
A group of general partners operating a successful general partnership
business is considering forming a C Corporation.
All rights reserved © 2025/ 2026 |
, Page |2
What tax consequence should be considered by owners of a general
partnership wanting to change to a C Corporation?
1. They will not pay self-employment taxes on their share of the profits.
2. They will not have to pay separate entity-level income tax.
3. Their remunerations from the corporations will not be subject to
payroll taxes.
4. Their receipt of distributions from the corporation is not subject to
separate tax.
Ans: 1. They will not pay self-employment taxes on their share
of the profits
What must a sole proprietor consider before converting their business
to either a C Corporation or a single member LLC?
1. Both a C corporation and a single-member LLC are taxed at the
corporate level at different tax rates.
2. A C corporation is subject to corporate income tax, while a single-
member LLC is regarded as a sole proprietorship for tax purposes.
3. Both a C corporation and a single-member LLC are taxed at the
corporate level at a flat tax rate.
All rights reserved © 2025/ 2026 |
, Page |3
4. A C corporation is subject to corporate income tax, while a single-
member LLC is treated as a regular corporation for tax purposes.
Ans: 2. A C Corporation is subject to corporate income tax,
while a single member LLC is regarded as a sole proprietorship
for tax purposes.
Which business type is treated as a corporation for tax purposes?
1. Publicly traded partnership
2.Limited liability company with sole ownership
3. General partnership
4. Limited liability company with multiple owners
Ans: 1. Publicly Traded Partnership
A C Corp is considering issuing 10,000 additional shares of stock to
finance its expansion. The par value of one share is $1, and the market
value of one share is $35. The company is able to raise capital of
$350,000 for these shares.
What is the tax implication for the corporation raising capital via
additional shares?
All rights reserved © 2025/ 2026 |
, Page |4
1. The premium amount of $340,000 will be added to the corporation's
gross income.
2. The premium amount of $340,000 will be taxed separately as a
capital gain.
3. The entire collection of $350,000 will be added to the corporation's
gross income.
4. The entire collection of $350,000 will not be taxed in the hands of
the corporation for raising capital.
Ans: 4. The entire collection of $350,000 will not be taxed in
the hands of the corporation for raising capital.
How would a C Corporation treat property donation and property tax
incentives by a municipality?
1. The property donation will be included in the gross income, but the
tax reduction will not be taxable.
2. The property donation will be treated as a nontaxable capital
contribution, but the tax reduction will result in an additional taxable
income.
3. Both the property donation and the tax reduction will be recognized
as taxable income.
4. Neither the property donation nor the tax reduction will be
considered taxable.
All rights reserved © 2025/ 2026 |
D557 Corporate Taxation Pre-Assessment
Questions and Correct Answers/ Latest
Update / Already Graded
An S Corporation forgoes it "S" status and becomes a "C" Corporation.
What is the tax consequence of this change on the shareholders of the
corporation?
1. Its shareholders will no longer pay self-employment tax on their
allocated income.
2. Its shareholders will no longer pay any taxes on distributions made
by the corporation.
3. Its shareholders will no longer be eligible for deductions for qualified
business income.
4. Its shareholders will no longer be eligible for dividend received
deduction for any receipt of distribution.
Ans: 3. Its shareholders will no longer be eligible for deductions
for qualified business income.
A group of general partners operating a successful general partnership
business is considering forming a C Corporation.
All rights reserved © 2025/ 2026 |
, Page |2
What tax consequence should be considered by owners of a general
partnership wanting to change to a C Corporation?
1. They will not pay self-employment taxes on their share of the profits.
2. They will not have to pay separate entity-level income tax.
3. Their remunerations from the corporations will not be subject to
payroll taxes.
4. Their receipt of distributions from the corporation is not subject to
separate tax.
Ans: 1. They will not pay self-employment taxes on their share
of the profits
What must a sole proprietor consider before converting their business
to either a C Corporation or a single member LLC?
1. Both a C corporation and a single-member LLC are taxed at the
corporate level at different tax rates.
2. A C corporation is subject to corporate income tax, while a single-
member LLC is regarded as a sole proprietorship for tax purposes.
3. Both a C corporation and a single-member LLC are taxed at the
corporate level at a flat tax rate.
All rights reserved © 2025/ 2026 |
, Page |3
4. A C corporation is subject to corporate income tax, while a single-
member LLC is treated as a regular corporation for tax purposes.
Ans: 2. A C Corporation is subject to corporate income tax,
while a single member LLC is regarded as a sole proprietorship
for tax purposes.
Which business type is treated as a corporation for tax purposes?
1. Publicly traded partnership
2.Limited liability company with sole ownership
3. General partnership
4. Limited liability company with multiple owners
Ans: 1. Publicly Traded Partnership
A C Corp is considering issuing 10,000 additional shares of stock to
finance its expansion. The par value of one share is $1, and the market
value of one share is $35. The company is able to raise capital of
$350,000 for these shares.
What is the tax implication for the corporation raising capital via
additional shares?
All rights reserved © 2025/ 2026 |
, Page |4
1. The premium amount of $340,000 will be added to the corporation's
gross income.
2. The premium amount of $340,000 will be taxed separately as a
capital gain.
3. The entire collection of $350,000 will be added to the corporation's
gross income.
4. The entire collection of $350,000 will not be taxed in the hands of
the corporation for raising capital.
Ans: 4. The entire collection of $350,000 will not be taxed in
the hands of the corporation for raising capital.
How would a C Corporation treat property donation and property tax
incentives by a municipality?
1. The property donation will be included in the gross income, but the
tax reduction will not be taxable.
2. The property donation will be treated as a nontaxable capital
contribution, but the tax reduction will result in an additional taxable
income.
3. Both the property donation and the tax reduction will be recognized
as taxable income.
4. Neither the property donation nor the tax reduction will be
considered taxable.
All rights reserved © 2025/ 2026 |
