Chapter 02


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CHAPTER 2 CORPORATIONS: INTRODUCTION AND OPERATING RULES Instructor: The test items in both the print Test Bank and ExamView test-creation software are numbered by question type within each chapter. Thus, users of ExamView can more easily preview their selections using the printed Test Bank in the same numbering system. Learning Objective, Level of Difficulty, Estimated Time to Completion, and the AACSB’s and AICPA’s Core Competencie s for each test item are located within the item itself. Status: Q/P Question/ Present in Prior Problem Topic Edition Edition TRUE OR FALSE 1 Sole proprietorship taxation Unchanged 1 2 Partnership taxation Modified 2 3 S corporation taxation New 4 Corporate tax versus partnership tax Unchanged 4 5 C corporation taxation: double taxation effect Unchanged 5 6 Partnership: capital gain pass through New 7 C corporation reasonable compensation Modified 7 8 Unreasonable compensation Unchanged 8 9 Salary versus dividend: corporate preference New 10 Corporate tax computation Unchanged 10 11 Corporate tax rates versus individual rates Unchanged 11 12 Nontax considerations in entity selection Unchanged 12 13 Classification for Federal taxation: single-member Unchanged 13 LLC 14 Accounting periods: fiscal year limitation for PSC Unchanged 14 15 Accounting methods: inventories New 16 Accounting methods: accrual basis corporation Modified 16 and cash basis related party 17 Corporate tax on LTCG Unchanged 17 18 Corporation’s capital loss Unchanged 18 19 Passive loss rules: applicability to closely held New C corporations and PSCs 20 Passive loss rules: closely held corporation Unchanged 20 21 Charitable contributions: accrual corporation New exception 22 Charitable contributions: capital gain property Unchanged 22 23 Charitable contributions: corporate inventory Unchanged 23 exception 2-1
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2-2 2010 Annual Edition/Test Bank Status: Q/P Question/ Present in Prior Problem Topic Edition Edition 24 Charitable contributions: limitation with carryover Modified 24 applied 25 Domestic production activities deduction Unchanged 25 26 NOL carryover Modified 26 27 Dividends received deduction Modified 27 28 Dividends received deduction Unchanged 28 29 Dividends received deduction: holding period Unchanged 29 requirement 30 Organizational expenditures: nonqualified expenses New 31 Personal service corporation rates Modified 31 32 Tax liability of related corporations Modified 32 33 Form 1120: requirements Unchanged 33 34 Schedule M-1: purpose of New 35 Schedule M-1: tax-exempt income Unchanged 35 36 Schedule M-1: nondeductible expense Unchanged 36 37 Schedule M-1: tax-exempt income Modified 37 38 Schedule M-1: net capital loss Modified 38 39 Schedule M-1: interest on loan to purchase Unchanged 39 tax-exempt bonds 40 Schedule M-3: voluntary filing Unchanged 40 41 Financial accounting considerations: FAS 109 Unchanged 41 deferred asset defined 42 Financial accounting considerations: FIN 48 Unchanged 42 MULTIPLE CHOICE 1 Corporate tax versus proprietorship tax
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