CTC Business Taxation & Entity Structures 2

Question 1

An S corporation shareholder's basis in their stock is increased by which of the following?

Accepted Answer

Non-separately stated income items

Answer

Non-separately stated (ordinary) income items passed through from an S corporation increase a shareholder's stock basis.

Question 2

Which entity type allows for a 'check-the-box' election to be taxed as a corporation?

Accepted Answer

Limited liability company (LLC)

Answer

LLCs can use the check-the-box regulations to elect their tax classification, including electing to be taxed as a corporation.

Question 3

For a partnership, what is the tax treatment of guaranteed payments made to a partner for services?

Accepted Answer

They are deductible by the partnership and ordinary income to the partner

Answer

Guaranteed payments are deductible by the partnership as a business expense and are treated as ordinary income to the receiving partner.

Question 4

A C corporation with $100,000 of taxable income pays corporate income tax at what current flat rate?

Accepted Answer

21%

Answer

The Tax Cuts and Jobs Act of 2017 established a flat 21% corporate income tax rate for C corporations.

Question 5

Which of the following is a disadvantage unique to C corporations compared to pass-through entities?

Accepted Answer

Double taxation of corporate profits

Answer

C corporations face double taxation because profits are taxed at the corporate level and again when distributed as dividends to shareholders.

(CTC) Chartered Tax Consultant Practice Test