1. What is an appropriate step in tax planning strategy for a potential personal holding company?
Convert taxable investment earnings to reduce long-term capital gains.
Issue stock to related parties to increase the total number of stockholders.
Adjust operating activities to increase the proportion of passive-to-total income
Declare a consent dividend after year-end to reduce the taxable base.
2. Where is a corporation’s non-business income allocated when computing the corporation’s state taxable income?
To the state of the corporate headquarters of the payer.
To the state of the corporate headquarters of the payee.
To multiple states per the transaction test.
To multiple states per the functional test.
3. What is a tax advantage of doing business as an S corporation?
Shareholders are not subject to the at-risk or passive activity limitations.
Corporate profits are taxed at the shareholders level in the year earned.
Nontaxable fringe benefits are available to S corporation employee shareholders.
S corporations can choose fiscal year ends without establishing a business purpose.