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CHAPTER 20--CORPORATIONS AND PARTNERSHIPS Student: ___________________________________________________________________________ 1. In determining whether an entity is to be recognized as a corporation for Federal income tax purposes, classification under state law is not conclusive. True False 2. Under the check-the-box Regulations, an entity is allowed an annual election on how it will be treated (e.g., corporation, partnership) for Federal income tax purposes. True False 3. In order to obtain limited liability, a sole proprietor incorporates his business. Under the check-the-box Regulations, the entity can elect to be treated as a partnership. True False 4. Under the check-the-box Regulations, a multi-owner entity that defaults (i.e., makes no election) will be taxed as a partnership. True False 5. Unlike partnerships, the income taxation of C corporations uses the conduit concept. True False 6. Unlike individuals, corporations cannot take advantage of § 1033 to elect to defer recognizing gain on involuntary conversions. True False 7. The foreign tax credit is available to both individuals and C corporations. True False 8. Although the corporate income tax is progressive, the lower brackets are phased out at higher taxable income levels. True False 9. Some corporations (e.g., personal service corporations) cannot use a calendar year for tax purposes. True False 10. For both individuals and corporations, net short-term capital gains are taxed at ordinary income rates. True False 11. For income tax purposes, excess capital losses of individuals and corporations are treated in the same manner. True False 1
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12. In the case of a corporation, net long-term capital gains can be taxed at a rate as low as 15%. True False 13. Like individuals, corporations cannot carry over excess charitable contributions indefinitely. True False 14. Under certain circumstances, corporations may be allowed a deduction for some of the appreciation on inventory that is donated to charity. True False 15. The domestic production activities deduction (DPAD) of a corporation cannot exceed 50% of its qualified production activities income (QPAI). True False 16. The domestic production activities deduction of an S corporation can be passed through to its shareholders. True False 17. In computing the NOL of a corporation, the dividends received deduction cannot be claimed. True False 18. A corporation’s election to forego a net operating loss carryback is irrevocable and cannot be changed later. True False 19. The amount of the dividends received deduction could be affected by the percentage of ownership held by the recipient corporation in the paying corporation. True False 20. Emerald Corporation and Gold Corporation each own 500 shares of IBM Corporation common stock and each receives the same amount of cash dividends on their stock investment. The dividends received deduction each corporation can claim will be the same.
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