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Taxation

Chapter 10 - Sole Proprietorship, Partnerships, LLCs, and S Corporations

QuestionAnswer
How are corporations like C Corporation taxed? They are taxed at an entity level.
True or false - C Corporation is taxed first, then shareholders may be taxed on distributions (dividends). This can lead to DOUBLE TAXATION. True
What is a sole proprietorship? A self-employed (a trade by an individual) business that is a profit-seeking activity and provides goods or services to the public.
What is graduated payment? A special allocation of ordinary income to a "working partner"
True or false - Partnership CANNOT deduct the guaranteed payment. False
True or false - General partner DO NOT pay the self-employment tax (guaranteed payments + distributive share of ordinary business income) while limited partner DO pay the self-employment tax. False
True or false - For adjusting partner's basis, a partner CANNOT deduct losses greater than the basis. True
What are the two extremes for tax consequences for business forms? - Taxed form as entity - C Corporation - Ignore the entity and report income to owners - Partnership, LLC, and S Corporation
In contrast to the passthrough entities, in which the taxpayers are the owners of those entities, the taxpayers are ___________ for business that are taxed as entities, such as C Corporations. Corporations
C Corporations is taxed first, then shareholders may be taxed on distributions. This is an example of ______ ______. Double taxation
Sole proprietorship - Self-employed (a trade by an individual) business that is a profit seeking activity (not a hobby) and provides goods or services to the public. - Ex: Madam Mam's in Austin
In sole proprietorship, earned income is subject to _________ tax. Self-employment
True or false - In sole proprietorship, cash distributions to owners have cash consequences. False
For Home Office Deduction, one can deduct expenses for using portion of the home IF the officials used exclusively on a regular basis.... (Name three uses) - As a principal place of business operated by the homeowner - As a place to meet patients, clients, and customers - Administrative/ management and taxpayer has no fixed location for those activities - Ex: Landscaping
If the home office qualifies, one can allocate expenses between business and personal use according to.... (List 5 things) - Utilities - Home mortgage interest and taxes - Insurance - Repairs - Depreciation
True or false - Home office deduction CANNOT exceed taxable income of the business before this deduction and CANNOT cause an NOL. True
What are the two types of partnership and define each of them. General partner (has unlimited liability) and limited partner (is only liable for contributed capital - responsible for how much they put in)
Limited liability partnership (LLP) is for _______ _______. Professional services
In limited liability partnership, ______ partners are not liable for malpractice of other partners and are personally liable for their own malpractice. General
True or false - When forming a partnership, a contribution is a TAXABLE event. False
Partnerships file Form _____ to document taxable income, while sole proprietorships file on Schedule C on Form ______ to document their taxable income 1065; 1040
What are the two things about a publicly traded partnership? Partnership interests are traded on an established securities market and these types of partnership are generally taxed as corporations (ex: real-estate investment trust)
Created by: U0105006
 

 



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