1.Regulations are
A. equal in authority to legislation if statutory
B. equal in authority to legislation
C. presumed to be valid and to have almost the same weight as the IRC
D. equal in authority to legislation if interpretative
2) Which of the following statements regarding proposed regulations is not correct?
A. Practitioners and other interested parties may comment on proposed regulations.
B. Proposed regulations expire after 3 years.
C. Proposed and temporary regulations are generally issued simultaneously.
D. Proposed regulations do not provide any insight into the IRS's interpretation of the tax law.
3) Identify which of the following statements is false.
A. Members from both the House and the Senate are on the Conference Committee.
B. When tax advisors speak of the tax law, they usually have in mind just the Internal Revenue Code.
C. Records of committee hearings are helpful in determining Congressional intent.
D. All are false.
4) Which of the following statements about a partnership is true?
A. Partners are taxed on distributions from a partnership.
B. A partnership is a taxpaying entity.
C. Partners are taxed on their allocable share of income whether it is distributed or not.
D. Partners are considered employees of the partnership.
5) Which of the following statements is incorrect?
A. The number of S corporation shareholders is unlimited.
B. S corporations must allocate income and expenses to their shareholders based on their proportionate ownership interest.
C. S corporation income is taxed to shareholders when earned.
D. S corporation losses can offset shareholder income from other sources.
6) Which of the following statements is incorrect?
A. Limited partners' liability for partnership debt is limited to their amount of investment.
B. In a general partnership, all partners have unlimited liability for partnership debts.
C. In a limited partnership, all partners participate in managerial decision-making.
D. All of the statements are correct.
7) Three members form an LLC in the current year. Which of the following statements is incorrect?
A. The LLC can elect to have its default classification ignored.
B. The LLC's default classification under the check-the-box rules is as a partnership.
C. The LLC can elect to be taxed as a C corporation with no special tax consequences.
D. If the LLC elects to use its default classification, it can elect to change its status to being taxed as a C corporation beginning with the third tax year after the initial classification.
8) Identify which of the following statements is false.
A. Under the check-the-box regulations, an LLC that has only two members (owners) must be taxed as a partnership.
B. The check-the-box regulations permit an LLC to be taxed as a C corporation.
C. A business need not be incorporated under state or federal law to be taxed as a corporation.
D. Once an election is made to change its classification, an entity cannot change again for 60 months.
9) Identify which of the following statements is true.
A. The check-the-box regulations permit an LLC to be taxed as a C corporation.
B. Under the check-the-box regulations, an LLC that has only two members (owners) default classification is as a partnership.
C. Once an election is made to change its classification, an entity cannot change again for 60 months.
D. All of the statements are true.
10) For Sec. 351 purposes the term property does not include
A. accounts receivable
B. cash
C. inventory
D. services rendered
11) Identify which of the following statements is true.
A. The exchange of stock for services rendered is not a taxable transaction.
B. The repeal of Sec. 351 would result in more existing businesses being incorporated.
C. Section 351 was enacted to allow taxpayers to incorporate without incurring adverse tax consequences.
D. All are false.
12) Barry, Dan, and Edith together form a new corporation; Barry and Dan each contribute property in exchange for stock. Within 2 weeks after the formation, the corporation issues additional stock to Edith in exchange for property. Barry and Dan each hold 10,000 shares and Edith will receive 9,000 shares. Which transactions will qualify for nonrecognition?
A. Only the second transaction will qualify for nonrecognition.
B. Only the first transaction will qualify for nonrecognition.
C. Because of the step transaction doctrine neither transaction will qualify.
D. Both transactions will qualify under Sec. 351 if they are part of the same plan of incorporation.