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Multiple Choice Quiz
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1
Corporations are legally formed by filing articles of agreement with the state in which the corporation will be created.
A)True
B)False
2
LLC members don't have as much flexibility as corporate shareholders to alter their legal arrangements with respect to one another, the corporation, and with outsiders.
A)True
B)False
3
LLCs with multiple members may elect to be taxed as corporations.
A)True
B)False
4
For tax purposes, a single-member LLC is treated as either a sole proprietorship or a disregarded entity.
A)True
B)False
5
Corporate income is not subject to double tax if the corporation does not pay dividends.
A)True
B)False
6
Qualified dividends may be subject to a marginal tax rate of 23.8 percent (20 percent for the capital gain and 3.8 percent for the Medicare Contribution Tax) for high income taxpayers.
A)True
B)False
7
Although corporate income is subject to double tax, in some circumstances, the overall tax rate for corporate income is lower than the tax rate for flow-through income.
A)True
B)False
8
Paying interest on loans to shareholders is a planning strategy to mitigate the double tax burden on corporation income.
A)True
B)False
9
Shareholders of C corporations are allowed to deduct their share of corporate losses on their (the shareholder's) tax return.
A)True
B)False
10
What document must corporations file with the state to organize their business?
A)Articles of incorporation
B)Certificate of LLC
C)Articles of organization
D)Partnership agreement
E)None of the above. Corporations need not file anything with the state to organize their business.
11
Which tax classifications can potentially apply to corporations?
A)S corporation
B)Partnership
C)C corporation
D)A and B
E)A and C
F)B and C
G)All of the above
12
If partnerships retain their after-tax earnings, when will partners be taxed on the earnings?
A)Partners will be taxed when they sell their shares at a gain
B)Partners will be taxed when they elect to be taxed on undistributed retained earnings
C)Partners will be taxed when the earnings are distributed to the partners
D)Partners will be taxed as partnership earnings are allocated to them at the end of the year whether they actually receive a distribution or not
13
Which of the following is an effective strategy for mitigating the double tax associated with C corporations?
A)Paying a dividend to a shareholder-employee
B)Leasing property to shareholder
C)Lending money to a shareholder
D)None of the above
14
Losses from which of the following entities are carried back and forward at the entity level?
A)S Corporation
B)LLC
C)Sole proprietorship
D)C corporation





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