M4 Items From Other Entities Flashcards
MCQ-04899
Miyasyke Inc., a calendar year S corporation, has 5 equal shareholders at the end of the tax year. Miyasyke had $75,000 of taxable income. Miyasyke made distributions to its shareholders of $32,000 each, for a total of $160,000. Each shareholder’s basis in the S corporation is $100,000 at
the beginning of the tax year. What amount from Miyasyke should be included in each shareholder’s gross income?
$15,000
Each shareholder reports his/her pro rata share of the S corporation’s taxable income in his or her gross income. The distributions are not taxable to the extent the shareholders’
basis exceeds the distribution (and increased for any income reported by them during the year).
MCQ-11074
Aston and Becker are equal partners in AB Partnership. In the tax year, the ordinary income of the partnership is $20,000, and the partnership has a long-term capital gain of $12,000. Aston’s basis in AB was $40,000, and he received distributions of $5,000 during the year. What is Aston’s share of AB’s ordinary income?
$10,000
Aston’s share of ordinary income is $10,000 (50 percent partnership percentage × $20,000 partnership ordinary income).
MCQ-01699
Freeman, a single individual, reported the following income in the current year:
Guaranteed payment from services rendered to a partnership: $50,000
Ordinary income from an S corporation: $20,000
What amount of Freeman’s income is subject to self employment tax?
$50,000
Guaranteed payments are reasonable compensation paid to a partner for services rendered (or use of capital) without regard to his ratio of income. Earned compensation is subject to self-employment tax. Payments not guaranteed are merely another way to distribute partnership profits. The ordinary income reported from an S corporation is taxable income to the individual on their own individual tax return but is not subject to self-employment tax. The ordinary income reported from a partnership may be subject to self-employment tax (if to a general partner).
MCQ-01751
A guaranteed payment by a partnership to a partner for services rendered may include an agreement to pay:
I. A salary of $5,000 monthly without regard to partnership income.
II. A 25 percent interest in partnership profits.
I only
I. A guaranteed payment is a salary or other payment to a partner that is not calculated with respect to partnership income.
II. Since the 25% interest is calculated with respect to partnership profits, it is not a guaranteed payment.
MCQ-01766
Guaranteed payments made by a partnership to partners for services rendered to the partnership, that are deductible business expenses under the Internal Revenue Code, are:
I. Deductible expenses on the U.S. Partnership Return of Income, Form 1065, in order to arrive
at partnership income (loss).
II. Included on schedules K-1 to be taxed as ordinary income to the partners.
Both I and II
Guaranteed payments to partners are deductible on Form 1065 to arrive at partnership ordinary income. On Schedule K-1, guaranteed payments are shown as income and flow through as ordinary income.
MCQ-11776
Which of the following is both an item that is an allowable tax deduction to the partnership, reported separately on the individual partner’s Schedule K-1, and then included on the partner’s individual tax return?
Guaranteed payments paid to partners
A partnership calculates net ordinary business income or loss and passes each partner’s distributive share through on Schedule K-1. Guaranteed payments paid to partners for
services provided or for the use of capital, without regard to partnership income or profit and loss sharing ratios, are an allowable deduction to the partnership and are also separately reported on Schedule K-1 for inclusion on the partner’s tax return.
MCQ-14695
Which of the following items must be separately stated on Form 1120S, U.S. Income Tax Return for an S Corporation, Schedule K-1?
Gain or loss from the sale of collectibles.
Gain or loss from the S corporation’s sale of collectibles is separately reported on the Schedule K-1 of IRS form 1120S
MCQ-08210
Carson owned 40% of the outstanding stock of a C corporation. During a tax year, the corporation reported $400,000 in taxable income and distributed a total of $70,000 in cash dividends to its shareholders. Carson accurately reported $28,000 in gross income on Carson’s individual tax return. If the corporation had been an S corporation and the distributions to the owners had been proportionate, how much income would Carson have reported on Carson’s individual return?
$160,000
S Corporations work in a similar fashion to partnerships. The income is passed through to the shareholder and included in taxable income whether or not it is actually distributed.
Therefore, Carson will report 40% of the $400,000 taxable income, or $160,000. The $28,000 distribution will not affect the taxable income, but will reduce Carson’s basis in the S Corporation stock.
MCQ-05543
Evan, an individual, has a 40% interest in EF, an S corporation. At the beginning of the year, Evan’s basis in EF was $2,000. During the year, EF distributed $100,000 and reported operating income of $200,000. What amount should Evan include in gross income?
$80,000
Like partnerships, S corporations report both separately and non-separately stated items of income and/or loss. Allocations to shareholders are made on a per-share, per-day
basis in accordance with ownership percentage. Shareholders in an S corporation must include on their personal income tax return their distributive share of each separate “pass-through” item. Shareholders are taxed on these items, regardless of whether or not these items have been distributed to them during the year.
EF’s operating income:$200,000
x Evan’s ownership: 40%
Gross income for Evan: $80,000
MCQ-15833
An S corporation pays one of its individual shareholders for services rendered to the S corporation, and a general partnership pays one of its partners for services rendered to the partnership. Which of the following statements is accurate regarding these payments?
The S corporation should classify the payments as deductible wages reportable on Form W-2.
A shareholder in an S corporation can be an employee of the corporation. The individual shareholder-employee would receive a salary for the services rendered to the S corporation; therefore, the payments should be classified as deductible wages reportable on Form W-2.
MCQ-08787
Which of the following is considered a specified service trade or business (SSTB) for purposes of the qualified business income deduction?
Accounting firm
Accounting services are considered an SSTB for purposes of the qualified business income deduction.
MCQ-08788
What is the basic deduction calculation for the qualified business income deduction?
20% × qualified business income (QBI)
MCQ-15815
An individual taxpayer received a Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc. from a small partnership, in which the taxpayer owns a 50 percent interest. The qualified business income amount attributable to the taxpayer is $70,000. That is the taxpayer’s only qualified business income, and the taxpayer has no capital gains or other investments. Ignoring the W-2 limitation, what
is the net amount of increase to taxable income from the partnership income?
$56,000
The taxpayer receives a $14,000 qualified business income deduction, which is 20 percent of the $70,000 qualified business income. The net increase in the taxpayer’s taxable
income from the partnership income is $56,000 ($70,000 – $14,000).
MCQ-08789
Which of the following statements is true regarding taxpayers with taxable income below the taxable income limitations for the qualified business income (QBI) deduction?
A qualified trade or business (QTB) and specified trade or business (SSTB) are treated the same.
A QTB and an SSTB are treated the same for taxpayers under the taxable income thresholds for the QBI deduction.
MCQ-08790
Which of the following is true about the qualified business income (QBI) deduction for taxpayers with taxable income above the taxable income limitations?
If the taxpayer is a specified service trade or business (SSTB), no QBI deduction is allowed.
For a specified service trade or business (SSTB) over the taxable income limitation, no QBI deduction is allowed.
