Sole Proprietorships

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Questions Bank

Taxes and Taxing Jurisdictions
Policy Standards for a Good Tax
Taxes as Transaction Costs
Maxims of Income Tax Planning
Tax Research
Taxable Income from Business Operations
Property Acquisitions and Cost Recovery Deductions
Property Dispositions
Nontaxable Exchanges
Sole Proprietorships
The Corporate Taxpayer
The Choice of Business Entity
Jurisdictional Issues in Business Taxation
The Individual Tax Formula
Compensation and Retirement Planning
Investment and Personal Financial Planning
Tax Consequences of Personal Activities
The Tax Compliance Process

All Questions

Question 1

Free

True/False

Haddie's Hats is a regular corporation. The business must file an income tax return each year to report its taxable income or loss and pay any related taxes.

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Question 2

Free

True/False

A partnership is an unincorporated business activity owned by at least two taxpayers.

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Question 3

Free

True/False

A corporate shareholder usually cannot be held personally liable for the debts arising from the corporate business.

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Question 4

Free

True/False

Gabriel operates his business as a sole proprietorship. This year the business incurred an operating loss. The loss can be used to offset other business income he earned during the year.

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True

False

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Question 5

Free

True/False

Mr Dilly has expenses relating to a qualifying home office of $14,320. The taxable income generated by the business before any deduction of home office expenses was $13,700. His allowable home office deduction is $14,320.

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Question 6

True/False

Jack operates a service business as a sole proprietorship. Her taxable income for the current year will be less than $100,000. Ms. Jack is not eligible for the Section 199A deduction.

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Question 7

True/False

Businesses must withhold payroll taxes from payments made to independent contractors and periodically remit such taxes to the state and federal governments.

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True

False

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Question 8

True/False

Matthew earned $150,000 in wages during 2018. FICA taxes withheld by his employer would have been $11,475.

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Question 9

True/False

The FICA taxes authorized by the Federal Insurance Contribution Act is imposed upon all of the employee's wages for the year.

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Question 10

True/False

Businesses are required by law to withhold federal income tax from the compensation paid to their employees.

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True

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Question 11

True/False

Partners may deduct on their individual income tax returns an amount equal to 100% of self-employment tax paid.

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Question 12

True/False

In contrast to a partnership, every member of an LLC has limited liability for the LLC's debts.

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Question 13

True/False

A partnership deducts guaranteed payments paid to its partners in computing ordinary income, and partners report guaranteed payments received as ordinary income.

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Question 14

True/False

All general partners have unlimited personal liability for the debts of the entity.

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Question 15

True/False

The allocations made to a partner are reported on Schedule K-1 and are referred to as his or her distributive share of partnership items.

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Question 16

True/False

Drake Partnership earned a net profit of $400,000. Four partners share profits and losses equally. No cash was distributed. The partners will report taxable income from the partnership on their personal income tax returns for the year.

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Question 17

True/False

A guaranteed payment may be designed to compensate a partner for personal services rendered to the partnership.

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Question 18

True/False

Partners receiving guaranteed payments are not required to pay self-employment tax on such payments.

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Question 19

True/False

On June 1, Jefferson had a basis in his partnership interest of $75,000. On June 2, he received a cash distribution from the partnership of $28,000. All of the cash distribution is taxable.

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Question 20

True/False

A partner's distributive share of partnership profits will increase his or her tax basis in the partnership interest.

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