Module 5

Question 1

Business Entities

Answer 1

1. Partnerships
2. S Corporation
3. Sole Proprietorship
4. C Corporation

Question 2

Partnerships

Answer 2

Form 1065 - K1 to partners

Guaranteed Payments = Payments on services are included on the tax payer’s income

Partners are consider self-employed.

General partners pay self employment tax on net earnings and guaranteed payments

Limited partners only pay self employment tax on guaranteed payments

Question 3

S Corporations

Answer 3

Form 1120S - K1 to shareholder

Shareholders are consider employees. The S corporation and the “employee” are responsible for payroll taxes

Shareholders pay personal income tax not self employment tax on the S corporation income

Question 4

Estates and Trusts

Answer 4

Form 1041 - Schedule K1

Distributions are deductible to the entity but taxable to the recipient.

Income distributed to the beneficiaries retains the same character (portfolio, passive)