Jordan is the sole proprietor of Adams Company that reported net income of

Jordan is the sole proprietor of adams company that

This preview shows page 15 - 17 out of 21 pages.

52. Jordan is the sole proprietor of Adams Company that reported net income of $57,000 for the year. During the yearhe withdrew $11,000 from the business for personal use. Jordan is in the 25% marginal tax bracket. How much income from the above must Jordan include in his taxable income for the year?a. $68,000b. $57,000c. $14,250d. $11,000ANSWER: bA sole proprietor is taxed on the entire net income for the year even though he did not withdraw all of it from the business. LO 1.5DIFFICULTY: Easy53. Elena owns 25% of a partnership that reported net income of $100,000 for the year. During the year $5,000 was distributed to Elena from the partnership. How much should Elena include in her taxable income for the year?LO 1.5DIFFICULTY: Moderate54. Sophia owns 20% of a partnership that reported net income of $130,000 for the year. During the year $18,000 was distributed to Sophia from the partnership. How much should Sophia include in her taxable income for the year?
Background image
16Taxation for Decision Makers Test Bank a distribution from the partnership ($130,000 x 20% = $26,000).LO 1.5DIFFICULTY: Moderate55. Crystal invested $8,000 cash in CRK Partnership for a 30% general partnership interest. In its first year of operations, CRK lost $15,000. In its second year of operations, CRK lost an additional $14,000. How much of the second year’s losses can Crystal deduct in that year?LO 1.5DIFFICULTY: Hard56. Elena owns 40% of Martinez, Inc., a regular C corporation, that reported net income of $80,000 for the year. During the year $8,000 was distributed to Elena from the corporation. How much income from the corporation should Elena include in her taxable income for the year?a. $40,000b. $32,000c. $8,000d. $3,200ANSWER: cThe shareholder is only taxed on the $8,000 dividend income received.LO 1.5DIFFICULTY: Easy57. Emma owns 40% of Johnson, Inc., a regular C corporation, that reported a net loss of $50,000 for the year. Emma acquired her stock on January 1 of the current year by investing $4,000 cash. In July, the corporation took out a bank loan for $25,000. How much of the loss can Emma deduct on her tax return for the year?LO 1.5DIFFICULTY: Moderate
Background image
Image of page 17

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture