Tax Consulting Business Tax Planning

Question 1

Which entity type allows owners to avoid double taxation while providing limited liability protection?

Accepted Answer

S Corporation

Answer

C Corporation

Answer

General Partnership

Answer

Sole Proprietorship

Question 2

Under IRC Section 179, what is the primary benefit for small businesses purchasing equipment?

Accepted Answer

Immediate expensing of qualifying assets

Answer

Deferred depreciation

Answer

Tax credit equal to purchase price

Answer

Exclusion from gross income

Question 3

A C Corporation's net operating loss (NOL) can generally be carried forward for how many years under current tax law?

Accepted Answer

Indefinitely

Answer

5 years

Answer

10 years

Answer

20 years

Question 4

Which depreciation method allows a business to take larger deductions in the early years of an asset's life?

Accepted Answer

Modified Accelerated Cost Recovery System (MACRS)

Answer

Straight-line depreciation

Answer

Units of production

Answer

Sum-of-the-years-digits only

Question 5

What is the tax treatment of a guaranteed payment made to a partner in a partnership?

Accepted Answer

Ordinary income to the partner, deductible by the partnership

Answer

Capital gain to the partner

Answer

Non-taxable distribution

Answer

Subject to corporate tax rates

Question 6

Which tax strategy involves shifting income to a family member in a lower tax bracket through gifts of income-producing property?

Accepted Answer

Income splitting

Answer

Tax deferral

Answer

Tax arbitrage

Answer

Basis shifting