Exam_3_practice_solutions

Exam_3_practice_solutions - Tax 4001 Fall 2010 Judd Exam 3...

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Tax 4001 Fall 2010 Judd Exam 3 Practice Questions Solutions 1. 1. Which of the following (a-c) is not correct with respect to limited liability companies? A)An advantage of an LLC when compared to a C corporation is the ability to pass tax attributes through to the owners. B) A disadvantage of a partnership when compared with an LLC is the inability of all the owners to have limited liability. C) An LLC has greater flexibility than does an S Corporation in terms of the number of owners, type of owners, special allocation opportunities and capital structure. D)All of the above (a-c) are correct. E) None of the above (a-c) is correct. D. 2. Maize Corporation had net operating income of $450,000 during the current year. In addition, Maize owns 50% of the stock in Blue Corporation and Blue Corporation paid Maize a dividend of $150,000. Maize has no other items of income and expense for the year. Compute Maize Corporation’s taxable income. Operating Income $450,000 Dividend Income 150,000 Taxable Income b4 DRD 600,000 DRD (120,000) Taxable Income $480,000 3. Kristy and Karla are equal partners in K&K Partnership. At the beginning of the year each partner’s adjusted basis in K&K was $120,000. During the year, K&K borrowed $180,000 (recourse debt). Also, during the year, K&K had an ordinary loss of $30,000; and a Net Long Term Capital Gain of $10,000. Considering these activities, compute each partner’s basis in her partnership interest at year end. Basis = 120,000 + 90,000 – 15,000 + 5,000
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Exam_3_practice_solutions - Tax 4001 Fall 2010 Judd Exam 3...

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