Taxation of Business Entities Exam Solutions
Course Introduction
This course explores the fundamental principles and rules governing the taxation of various business entities, including corporations, partnerships, limited liability companies, and S corporations. Students will examine tax planning strategies, the impact of entity selection on tax liability, and the federal income tax consequences of forming, operating, and liquidating business entities. Emphasis is placed on understanding the Internal Revenue Code as it applies to these entities, with real-world examples and case studies to illustrate common issues and solutions in business tax practice.
Recommended Textbook
South Western Federal Taxation 2019 Comprehensive 42nd Edition by David M. Maloney
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28 Chapters
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4038 Flashcards
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Page 2
Chapter 1: An Introduction to Taxation and Understanding
the Federal Tax Law
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Sample Questions
Q1) A state income tax can be imposed on nonresident taxpayers who earn income within the state on an itinerant basis.
A)True
B)False
Answer: True
Q2) Regarding proper ethical guidelines, which (if any) of the following is correct?
A) The use of client estimates in preparing a return may be acceptable.
B) Under no circumstances should a question on a tax return be left unanswered.
C) If a client has made a mistake in a prior year's return and refuses to correct it, you should withdraw from the engagement.
D) If the exact amount of a deduction is not certain (e.g., around mid-$600s), it should be recorded as an odd amount (i.e., $649) so as to increase the appearance of greater certainty.
E) None of these.
Answer: A
Q3) The civil fraud penalty can entail large fines and possible incarceration.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Working with the Tax Law
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Sample Questions
Q1) When searching on an electronic (online) tax service, which approach is more frequently used?
A) Internal Revenue Code section approach
B) Keyword approach
C) Table of contents approach
D) Index
E) All are about the same
Answer: B
Q2) The following citation could be a correct citation: Rev. Rul. 95-271,1995-64 I.R.B. 18.
A)True
B)False
Answer: False
Q3) Determination letters usually involve completed transactions.
A)True
B)False
Answer: True
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Chapter 3: Computing the Tax
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Sample Questions
Q1) Roy and Linda were divorced in 2017. The divorce decree awards custody of their children (under age 17) to Linda but is silent as to who is entitled to treat them as dependents for purposes of claiming the child credit. If Roy furnished more than half of their support, he can claim the child tax credit for them in 2018.
A)True
B)False
Answer: False
Q2) Lee, a citizen of Korea, is a resident of the U.S. Any rent income Lee receives from land he owns in Korea is not subject to the U.S. income tax.
A)True
B)False
Answer: False
Q3) Darren, age 20 and not disabled, earns $4,300 during 2018. Darren's parents cannot claim him as a dependent unless he is a full-time student.
A)True
B)False
Answer: True
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Chapter 4: Gross Income: Concepts and Inclusions
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Sample Questions
Q1) Tom, a cash basis taxpayer, purchased a bond on March 31 for $10,000, plus $100 accrued interest. In December, Tom collected $500 interest from the bond. Tom's interest income from the bond for the year is $500.
A)True
B)False
Q2) George and Erin divorced in 2019, and George is required to pay Erin $20,000 of alimony each year. George earns $75,000 a year. Erin is required to include the alimony payments in gross income although George earned the income.
A)True
B)False
Q3) The taxable portion of Social Security benefits may be affected by:
A) The taxpayer's itemized deductions.
B) The individual's tax-exempt interest income.
C) The number of quarters the individual worked.
D) The individual's standard deduction.
E) None of these.
Q4) Your client is considering transferring $25,000 from his savings account in a local bank paying 2% interest to a bank in Mexico City fully-insured bank paying 3%. What do you advise?
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Chapter 5: Gross Income: Exclusions
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Sample Questions
Q1) Meg's employer carries insurance on its employees that will pay an employee his or her regular salary while the employee is away from work due to illness. The premiums for Meg's coverage were $1,800. Meg was absent from work for two months as a result of a kidney infection. Meg's employer's insurance company paid Meg's regular salary of $8,000 while she was away from work. Meg also collected $2,000 on a wage continuation policy she had purchased. Meg must include $11,800 in her gross income.
A)True
B)False
Q2) Sam was unemployed for the first two months of 2018. During that time, he received $4,000 of state unemployment benefits. He worked for the next six months and earned $14,000. In September, he was injured on the job and collected $5,000 of workers' compensation benefits. Sam's Federal gross income from the above is $18,000 ($4,000+ $14,000).
A)True
B)False
Q3) What are the tax problems associated with payments received by a wife from her deceased husband's employer? (Assume the wife renders no services to the employer.)
Q4) What Federal income tax benefits are provided for college students?
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Page 7
Chapter 6: Deductions and Losses: In General
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Sample Questions
Q1) Iris, a calendar year cash basis taxpayer, owns and operates several TV rental outlets in Florida, and wants to expand to other states. During 2018, she spends $14,000 to investigate TV rental stores in South Carolina and $9,000 to investigate TV rental stores in Georgia. She acquires the South Carolina operations, but not the outlets in Georgia. As to these expenses, Iris should:
A) Capitalize $14,000 and not deduct $9,000.
B) Expense $23,000 for 2018.
C) Expense $9,000 for 2018 and capitalize $14,000.
D) Capitalize $23,000.
E) None of the above.
Q2) Why are there restrictions on the recognition of gains and losses resulting from transactions between related parties?
Q3) If a publicly-traded corporation hires a new CEO in 2018 and she earns $12,000,000 from a performance-based compensation plan, the corporation can deduct the entire $12,000,000.
A)True
B)False
Q4) For a vacation home to be classified in the primarily rental use category, what attributes must be present?
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Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
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Sample Questions
Q1) In 2017, Sarah (who files as single) had silverware worth $10,000 (basis $6,000) stolen from her home. Sarah's insurance company told her that her policy did not cover the theft. Sarah's other itemized deductions last year were $2,000. She had AGI of $30,000 last year. In August of 2018, Sarah's insurance company decided that Sarah's policy did cover the theft of the silverware and they paid Sarah $5,000. Determine the tax treatment of the $5,000 received by Sarah during 2018.
A) None of the $5,000 should be included in gross income.
B) $2,900 should be included in gross income.
C) $5,000 should be included in gross income.
D) Last year's return should be amended to include the $5,000.
E) None of the above.
Q2) If personal casualty gains exceed personal casualty losses (after deducting the $100 floor), there is no itemized deduction.
A)True
B)False
Q3) A bona fide debt cannot arise on a loan between father and son.
A)True
B)False
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Chapter 8: Depreciation, Cost Recovery, Amortization, and Depletion
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Sample Questions
Q1) MACRS depreciation is used to compute earnings and profits.
A)True
B)False
Q2) On July 15, 2018, Mavis paid $275,000 for improvements on a commercial building she owns. Determine the maximum total cost recovery from the improvements in 2018.
Q3) Nora purchased a new automobile on July 20, 2017, for $29,000. The car was used 60% for business and 40% for personal use. In 2018, the car was used 30% for business and 70% for personal use. Nora elects not to take additional first-year depreciation. Determine the cost recovery recapture and the cost recovery deduction for 2018.
Q4) Discuss the criteria used to determine whether a building is residential or nonresidential realty. Also explain the tax consequences resulting from this determination if the property is placed in service in 2018.
Q5) Under the alternative depreciation system (ADS), the half-year convention must be used for personalty.
A)True
B)False
Q6) Discuss the reason for the inclusion amount with respect to leased automobiles.
Page 10
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Chapter 9: Deductions: Employee and
Self-Employed-Related Expenses
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Sample Questions
Q1) In some cases it may be appropriate for a taxpayer to deduct work-related expenses as both a sole proprietor and an employee.
A)True
B)False
Q2) Joyce, age 40, and Sam, age 42, who have been married for seven years, are both active participants in qualified retirement plans. Their total AGI for 2018 is $130,000. Each is employed and earns a salary of $65,000. What are their combined deductible contributions to traditional IRAs?
A) $0
B) $3,000
C) $4,000
D) $8,000
E) None of the above
Q3) Qualified moving expenses of an employee that are not reimbursed are a deduction for AGI.
A)True B)False
Q4) Sue uses her own tools.
Q5) Lynn determines when the services are to be performed.
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Chapter 10: Deductions and Losses: Certain Itemized
Deductions
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Sample Questions
Q1) Linda is planning to buy Vicki's home. They want to keep the transaction simple, so the sales agreement will not apportion the property taxes that Vicki has already paid on the home. Comment on the tax implications for Linda and Vicki.
Q2) Sergio was required by the city to pay $2,000 for the cost of new curbing installed by the city in front of his personal residence. The new curbing was installed throughout Sergio's neighborhood as part of a street upgrade project. Sergio may not deduct $2,000 as a tax, but he may add the $2,000 to the basis of his property.
A)True
B)False
Q3) Upon the recommendation of a physician, Ed has a swimming pool installed at his residence because of a heart condition. If he is allowed to deduct all or part of the cost of the pool, Ed's increase in utility bills due to the operation of the pool qualifies as a medical expense.
A)True
B)False
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Chapter 11: Investor Losses
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Sample Questions
Q1) Jon owns an apartment building in which he is a material participant and also owns a computer consulting business. Of the 2,000 hours he spends on these activities during the year, 55% of the time is spent operating the apartment building and 45% of the time is spent in the computer consulting business.
A) The computer consulting business is a passive activity but the apartment building is not.
B) The apartment building is a passive activity but the computer consulting business is not.
C) Both the apartment building and the computer consulting business are passive activities.
D) Neither the apartment building nor the computer consulting business is a passive activity.
E) None of the above.
Q2) Kathy, who qualifies as a real estate professional, owns an apartment building and devotes 550 hours to managing the activity. All losses from the rental activity will be considered nonpassive and deductible against active income.
A)True
B)False
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13
Chapter 12: Tax Credits and Payments
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Sample Questions
Q1) In January 2018, Tammy acquired an office building in downtown Syracuse, New York for $400,000. The building was constructed in 1932 and is a certified historic structure. Of the $400,000 cost, $40,000 was allocated to the land.
Tammy immediately placed the building into service, but she quickly realized that substantial renovation would be required to keep and attract new tenants. The renovations, costing $600,000, were of the type that qualifies for the rehabilitation credit. The improvements were completed in October 2018.
a. Compute Tammy's rehabilitation tax credit for the year of acquisition.
b. Determine the cost recovery deduction for 2018.
c. What is the basis in the property at the end of its first year of use by Tammy?
Q2) Unless a taxpayer is disabled, the tax credit for the elderly or disabled is available only if the taxpayer is at least 59 1/2 years old.
A)True
B)False
Q3) How does the FICA tax compare to the self-employment tax? How are these two taxes similar and how do they differ?
Q4) Describe the withholding requirements applicable to employers.
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Chapter 13: Property Transactions: Determination of Gain or
Loss, Basis Considerations, and Nontaxable Exchanges
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Sample Questions
Q1) A realized gain on an indirect (conversion into money) involuntary conversion of business property can be postponed, but a realized loss on an indirect involuntary conversion of business property cannot be postponed.
A)True
B)False
Q2) To qualify as a like-kind exchange, real property must be exchanged either for other real property or for personal property with a statutory life of at least 39 years.
A)True
B)False
Q3) Katrina, age 58, rented (as a tenant) the house that was her principal residence from January 1, 2018 through December 31, 2019. She purchased the house on January 1, 2020, for $150,000 and continued to occupy it through June 30, 2021. She leased it to a tenant from July 1, 2021, through December 31, 2022. On January 1, 2022, she sells the house for $350,000. She incurs a realtor's commission of $20,000. Calculate her recognized gain if her objective is to minimize the recognition of gain and she does not intend to acquire another residence.
Q4) Discuss the treatment of losses from involuntary conversions.
Q5) Define a bargain purchase of property and discuss the related tax consequences. To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Property Transactions: Capital Gains and
Losses, Section 1231, and Recapture Provisions
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Sample Questions
Q1) Annabelle is a "trader" in securities. She works for a national securities firm. She occasionally buys and sells securities for her personal account. On May 10, 2017, she purchased 100 shares of Acorn, Inc. common stock for a total of $40,000. She sold all of those shares for a total of $46,000 on July 11, 2018. What was the amount and nature of her gain or loss from this transaction? What could she have done to change this result?
Q2) Tan, Inc., sold a forklift on April 12, 2018, for $8,000 (its FMV) to its 100% shareholder, Ashley. Tan's adjusted basis for the forklift was $12,000. Ashley's holding period for the forklift:
A) Includes Tan's holding period for the forklift.
B) Begins on April 12, 2018.
C) Begins on April 13, 2018.
D) Does not begin until Ashley sells the forklift.
E) None of the above.
Q3) The subdivision of real property into lots for resale when no substantial physical improvements have been made to the property never causes the gain from sale of the lots to be treated as ordinary income.
A)True
B)False
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Chapter 15: Taxing Business Income
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Sample Questions
Q1) A partnership will need to report wages paid to its employees as a separate line item on Schedule K-1 to help partners calculate their QBI deduction.
A)True
B)False
Q2) Aaron is the sole shareholder and CEO of ABC, Inc., an S corporation that is a qualified trade or business. During the current year, ABC has net income of $325,000 after deducting Aaron's $100,000 salary. In addition to his compensation, ABC pays Aaron dividends of $250,000. What is Aaron's qualified business income?
A) $-0-.
B) $100,000.
C) $250,000.
D) $325,000.
E) None of the above.
Q3) What is a limited liability company? What favorable nontax and tax attributes does the LLC entity form offer taxpayers?
Q4) What are some of the issues remaining unresolved with the QBI deduction?
Q5) Describe the limitations on the qualified business income deduction that apply to high income taxpayers.
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Chapter 16: Accounting Periods and Methods
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Sample Questions
Q1) A doctor's incorporated medical practice may end the last day of any month of the year.
A)True
B)False
Q2) Which of the following statements is true concerning the disposition of an installment note?
A) Deferred gain is not recognized by the transferor if the installment note is a non-taxable transfer to a controlled corporation.
B) Deferred gain must only be recognized if the installment note was transferred as a gift to a related party.
C) Transfer of an installment obligation to another party will not trigger immediate recognition of deferred gain.
D) Deferred gain must be recognized if the note is transferred to the owner's estate at his death.
E) None of the above.
Q3) The tax year of one of the principal partners may determine the partnership's tax year.
A)True
B)False
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Page 18
Chapter 17: Corporations: Introduction and Operating Rules
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Sample Questions
Q1) Schedule M-1 of Form 1120 is used to reconcile financial net income with taxable income reported on the corporation's income tax return as follows: net income per books + additions - subtractions = taxable income. Which of the following items is a subtraction on Schedule M-1?
A) Book depreciation in excess of tax depreciation.
B) Excess of capital losses over capital gains.
C) Proceeds on key employee life insurance.
D) Income subject to tax but not recorded on the books.
E) None of the above.
Q2) A corporation must file a Federal income tax return even if it has no taxable income for the year.
A)True
B)False
Q3) Contrast the tax treatment of capital gains and losses of C corporations with that of individual taxpayers.
Q4) An expense that is deducted in computing net income per books but not deductible in computing taxable income is a subtraction item on Schedule M-1.
A)True
B)False
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Chapter 18: Corporations: Organization and Capital Structure
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Sample Questions
Q1) Rita forms Finch Corporation by transferring land (basis of $125,000? fair market value of $750,000) which is subject to a mortgage of $375,000. Two weeks prior to incorporating Finch, Rita borrows $125,000 for personal purposes and gives the lender a second mortgage on the land. Finch Corporation issues stock worth $250,000 to Rita and assumes the two mortgages on the land. What are the tax consequences to Rita and to Finch Corporation?
Q2) Albert transfers land (basis of $140,000 and fair market value of $320,000) to Gold Corporation for 80% of its stock and a note payable in the amount of $80,000. Gold assumes Albert's mortgage on the land of $200,000.
A) Albert has a recognized gain on the transfer of $140,000.
B) Albert has a recognized gain on the transfer of $80,000.
C) Albert has a recognized gain on the transfer of $60,000.
D) Gold Corporation has a basis in the land of $220,000.
E) None of the above.
Q3) Trish and Ron form Pine Corporation. Trish transfers inventory (basis of $60,000 and fair market value of $110,000) for 50% of the stock in Pine. Ron transfers machinery (basis of $20,000 and fair market value of $60,000) and agrees to serve as manager of Pine Corporation for one year for 50% of the stock. What are the tax consequences to Trish, Ron, and Pine Corporation?
Page 20
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Chapter 19: Corporations: Distributions Not in Complete
Liquidation
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Q1) As of January 1, Cassowary Corporation has a deficit in accumulated E & P of $100,000. For the tax year, current E & P (accrued ratably) is $240,000 (prior to any distributions). On July 1, Cassowary Corporation distributes $275,000 to its sole shareholder. The amount of the distribution that is a dividend is:
A) $20,000.
B) $140,000.
C) $240,000.
D) $275,000.
E) None of the above.
Q2) Penalties paid to state government for failure to comply with state law.
Q3) Steve has a capital loss carryover in the current year of $30,000. He owns 3,000 shares of stock in Carmine Corporation, which he purchased six years ago for $20 per share. In the current year, Carmine Corporation (E & P of $750,000) redeems all of his shares for $140,000. Steve is in the 32% tax bracket. What is his income tax liability with respect to the corporate distribution if:
a. The redemption qualifies for sale or exchange treatment, and Steve has no other transactions in the current year involving capital assets?
b. The redemption does not qualify for sale or exchange treatment?
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Chapter 20: Corporations: Distributions in Complete
Liquidation and an Overview of Reorganizations
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Q1) A subsidiary corporation is liquidated at a time when it is indebted to its parent corporation. The subsidiary corporation distributes property to the parent corporation in satisfaction of the indebtedness. If the liquidation is governed by §332, neither the subsidiary nor the parent recognize gain or loss on the transfer of property in satisfaction of indebtedness.
A)True
B)False
Q2) One similarity between the tax treatment accorded liquidating and nonliquidating distributions is with respect to a shareholder's basis in property received in such distributions. For each type of distribution, the shareholder's basis is the property's fair market value on the date of distribution.
A)True
B)False
Q3) The related-party loss limitation in a complete liquidation applies only to distributions of property while the built-in loss limitation can apply to a distribution or sale of property.
A)True
B)False
Q4) Discuss the role of letter rulings in corporate reorganizations.
Page 22
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Chapter 21: Partnerships
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Q1) If a partnership earns tax-exempt income, the income should not affect the partners' bases in their partnership interests. Do you agree with this statement? Explain.
Q2) At the beginning of the year, Elsie's basis in the E&G Partnership interest is $90,000. She receives a proportionate current (nonliquidating) distribution from the partnership consisting of $10,000 of cash, unrealized accounts receivable (basis of $0, fair market value $40,000), and land (basis of $30,000, fair market value of $50,000). After the distribution, Elsie's bases in the accounts receivable, land, and partnership interest are:
A) $0? $30,000? and $50,000.
B) $0? $50,000? and $30,000.
C) $40,000? $30,000? and $10,000.
D) $40,000? $40,000? and $0.
E) $40,000? $50,000? and $0.
Q3) The sum of the partners' ending basis amounts on all Schedules K-1 equals the partners' ending capital account balance shown on the partnership's Schedule L.
A)True
B)False
Q4) Guaranteed payment
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23
Chapter 22: S Corporations
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Q1) The Section 179 expense deduction is a Schedule K item on the Form 1120S.
A)True
B)False
Q2) Where the S corporation rules are silent, C corporation provisions apply.
A)True
B)False
Q3) Which, if any, of the following items has no effect on the stock basis of an S corporation shareholder?
A) Operating income.
B) Long-term capital gain.
C) Cost of goods sold.
D) Short-term capital loss.
E) The 20% QBI deduction.
Q4) Liabilities affect the owner's basis differently in an S corporation than they do in a partnership.
A)True
B)False
Q5) Only 51% of the shareholders must consent to an S election.
A)True
B)False
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Chapter 23: Exempt Entities
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Questions
Q1) One of the requirements for an exempt organization being classified as an unrelated trade or business is that the trade or business is not substantially related to the exempt purpose of the organization. How can an exempt organization avoid satisfying this requirement?
Q2) Plus, Inc., is a § 501(c)(3) organization. It generates a small amount of net income each year. Ralph, the CEO of Plus, Inc., is concerned that Plus may be subject to the unrelated business income tax. Is there a materiality exception to this tax? A 501(c)(3) with "net income" does not automatically result in a UBIT classification. They must be conducting a trade or business that is regularly carried on and that is not substantially related to its exempt purpose.
Q3) Engaging in a prohibited transaction can result in an exempt organization being subject to Federal income tax, but such an act cannot cause the entity to lose its exempt status unless the exempt organization repeats the prohibited transaction.
A)True
B)False
Q4) Which requirements must be satisfied for an exempt organization to be classified as an unrelated trade or business? Is being classified as an unrelated trade or business good or bad?
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Page 25
Chapter 24: Multistate Corporate Taxation
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Q1) A capital stock tax usually is structured as an excise tax imposed on a corporation's "net worth," using financial statement data to compute the tax.
A)True
B)False
Q2) Discuss how a multistate business divides up its corporate taxable income among the states in which it operates.
Hint: use the terms allocation and apportionment in your comments.
Q3) All of the U.S. states have adopted a tax based on the net taxable income of corporations.
A)True
B)False
Q4) A garment purchased for resale.
Q5) Checking the customer's inventory to determine whether a reorder is needed.
Q6) P.L. 86-272________________ (does/does not) create nexus when the sales representative approves a sale at the customer's location.
Q7) A garment purchased by a self-employed actress.
Q8) Q adopts a sales-only apportionment formula.
Q9) Deduction for advertising expenditures.
Page 26
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Chapter 25: Taxation of International Transactions
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Q1) Foreign taxpayers earning income inside the United States.
Q2) Jaime received gross foreign-source dividend income of $250,000. Foreign taxes withheld on the dividend were $25,000. Jaime's total U.S. tax liability is $840,000 (the 21% marginal tax rate applies). Jaime's current year FTC is $87,500.
A)True
B)False
Q3) In working with the foreign tax credit, a U.S. corporation may be able to alleviate the problem of excess foreign taxes by:
A) Deducting the excess foreign taxes that do not qualify for the credit.
B) Repatriating more foreign income to the United States in the year there is an excess limitation.
C) Generating "same basket" foreign-source income that is subject to a tax rate higher than the U.S. tax rate.
D) Generating "same basket" foreign-source income that is subject to a tax rate lower than the U.S. tax rate.
Q4) Owner of shares counted in determining whether a foreign corporation is a controlled foreign corporation.
Q5) Individual who is not a U.S. citizen or resident.
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Chapter 26: Tax Practice and Ethics
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184 Verified Questions
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Sample Questions
Q1) The "IRS's attorney" is known as the Chief Counsel.
A)True
B)False
Q2) Undervaluation of a reported item.
Q3) A taxpayer can take a dispute to the ________________ Division of the Tax Court when the disputed amounts do not exceed $50,000.
Q4) Under Circular 230, Burke cannot complete a client's original Form 1040 and charge a fee equal to one-third of the resulting refund.
A)True
B)False
Q5) Failure to file a tax return.
Q6) Evaluate this statement: a taxpayer is liable not only for tax penalties as described in the tax Code and Regulations.
Sanctions elsewhere in Federal law, such as in the criminal code, also apply in a tax dispute.
Q7) Carole, a CPA, feels that she cannot act as an aggressive advocate for tax clients in today's environment. What aspects of the ethical conduct of a tax practice might have influenced Carole's attitude?
Page 28
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Chapter 27: The Federal Gift and Estate Taxes
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141 Verified Questions
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Sample Questions
Q1) What is the justification for the terminable interest rule that is applicable to the marital deduction?
Q2) Maggie purchased an insurance policy on Jim's life and designated Susan as the beneficiary.
Q3) Lyle and Kelly are brother and sister. Using his funds, Lyle purchases land, listing title as: "Lyle and Kelly, joint tenants with right of survivorship." If Kelly dies first, none of the land is included in her gross estate.
A)True
B)False
Q4) Howard establishes a trust, life estate to his children, remainder to the grandchildren. Under its terms, the trust is revocable by Howard. Howard later relinquishes the right to revoke the trust.
Q5) At the time of Dylan's death, he was a resident of the United States. He owns land located in a foreign country, which is subject to that country's estate tax. This same land also can be subject to the Federal estate tax.
A)True
B)False
Q6) Interest on municipal bonds accrued after death.
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Chapter 28: Income Taxation of Trusts and Estates
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161 Verified Questions
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Sample Questions
Q1) With respect to a trust, the terms creator, donor, and grantor are synonyms.
A)True
B)False
Q2) During the current year, the Santo Trust received $30,000 of taxable interest income, paid trustee's commissions of $3,000, and had no other income or expenses. The Santo trust instrument requires that $20,000 be paid annually to Marilyn, and $40,000 be paid annually to Domingo. How much gross income must Marilyn and Domingo recognize?
A) $20,000 by Marilyn and $40,000 by Domingo.
B) $15,000 by Marilyn and $15,000 by Domingo.
C) $13,500 by Marilyn and $13,500 by Domingo.
D) $9,000 by Marilyn and $18,000 by Domingo.
Q3) The Malik Estate operates a manufacturing business. Malik made no income distributions this year. It can claim the full deduction for the MACRS depreciation of the assets of the business.
A)True
B)False
Q4) The entity is controlled by Federal-level probate laws.
Q5) The rental income of a trust usually is allocable to ________________ (income, remainder) beneficiaries.
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