1)Which of the following legal entities gives the taxpayer the choice to be taxed either as a sole proprietorship, partnership, C corporation, or an S corporation, depending on the number of owners and tax elections made by the taxpayer?
A. Limited Partnerhship
B. Limited Liability Company
C. General Partnership
D. Sole Proprietorship
E. Corporation
F. None of the above entities gives the taxpayer that many choices.
2)Which of the following statements is false?
A. While the selection of legal entity may have significant consequences concerning legal liability, the taxation of real estate is essentially similar regardless of what kind of entity owns the real estate.
B. The right to deduct depreciation on real estate does not depend entirely on who owns legal title to the property.
C. Even though partnerships are required to file a separate income tax return on Form 1065, as a general rule, partnerships are not taxpaying entities.
D. A financial investment in real estate without transfer of either possession or legal title may NOT be sufficient to allow a taxpayer to claim a depreciation deduction on that real estate.
3)Which of the following is NOT a tax disadvantage for a C Corporation (regular corporation that has not made an S Election) owning investment real estate?
A. Possible double taxation when the corporation sells appreciated real estate at a gain.
B. Possible Assessment of Accumulated Earnings Tax.
C. The possibility of being classified as a personal holding company and thus being subject to a penalty tax on undistributed personal holding company income.
D. The inability of shareholders of the C corporation to deduct rental losses against their personal income.
E. All of the above are tax disadvantages of C corporations owning investment real estate.