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First Name______________________________Last Name: ______________________________________
Home work-Chapter 2.
On the right side of the page enter letter of the best answer for each question.
Enter the letter of your answers on:
Turn in one copy of your answer page. (43 @ 2.5 Pts. = 107.5)
This is a “bread and butter” chapter. It covers day to day tax compliance (and planning). You need to know
everything in this chapter. Many questions are based on law not explained in this text, because the law was
covered in Tax-I and the accounting methods were covered in Intermediate Accounting. Your graduate
courses build on the foundation you obtained in earlier courses.
[Pg. 2-5] Jan is married and files a joint return.
The joint return does not have unusually large personal
The joint return does not contain substantial amounts of income other than the income from
the business described below.
Jan operates an unincorporated office supply business that has the
following income statement each year:
Jan is considering incorporating the business.
If the business is incorporated, she will draw a salary of
$50,000, and the corporation will not pay dividends.
Retained earnings will be reinvested in additional
warehouse space and delivery equipment.
The corporation is not expected to have surplus funds in the
forseeable future. Which of the following organizational forms is likely to result in the lowest total
income tax burden?
Corporation without S election
Corporation with S election
[Pg. 2-3] Sue owns 100% of Sue Corp. (C corporation) and 50% of SueCorpS (S corporation).
She is also a 50% partner in the Sue Partnership.
She works in all three businesses, but only receives compensation (salary) from the two corporations.
Her beginning tax basis is $65,000 for each of the three entities. Transactions for the year are as follows.
Compensation to Sue
Net Income and taxable income
Total dividends paid to shareholder
Total dividends paid to shareholders
Total distribution to partners
How much gross income is to be reported by Sue from these three entities for the year?
[Pg. 2-8] Which of the following cannot choose its tax entity status with the Check the box regulations?
Choosing a tax year.
Which taxpayers face restrictions on use of a fiscal year?