Question

1. A purchaser has agreed to purchase the shares of a qualified small business corporation. Which of the following is notapplicable?

Select one:

a. The purchaser may try to discount the value of the shares if a future sale of the assets may result in a tax liability.

b. The sale will result in the immediate taxation of the corporation, and the after-tax proceeds will be paid to the seller.

c. The purchaser will assume the corporation's current UCC values.

d. The seller may be eligible for the capital gains deduction.

2. Which of the following statements regarding partnerships is TRUE?

Select one:

a. Partnership income is taxed in the partnership.

b. Accumulated partnership profits are subject to further taxation when distributed to the partner.

c. Partnerships may earn business income, property income, and capital gains.

d. Partnership losses cannot be offset against the partners' other income.

3. A purchaser has agreed to purchase all of the shares of Tee Co., a CCPC. Tee Co. owns fifteen significant capital assets, all of which have appreciated in value. Which of the following is TRUE?

Select one:

a. The sale will result in business income for the vendor.

b. The purchaser will obtain a cost base of the assets equal to their fair market values.
c. Capital cost allowance will be based on higher asset values for the purchaser than was the case for the vendor.

d. The purchaser will be responsible for the liabilities of Tee Co.

4. Sam wishes to purchase Kitchen Cabinets, Inc. (KCI) Which of the following is TRUE if Sam purchases the assets of the corporation rather than the shares from the company's sole shareholder, Brent?

Select one:

a. Sam will have no choice but to assume the liabilities of KCI.

b. Payment of the purchase price will flow directly to Brent.

c. Kitchen Cabinets Inc. may be subject to business income and capital gains.

d. Brent will be eligible to use for the capital gains deduction on the sale.

5. Which of the following statements regarding partnerships is true?

Select one:

a. A corporation cannot act as a partner.

b. It is possible that a minority partner will have significant influence over the partnership.

c. Partners must contribute equal portions of capital to the partnership.

d. A general partnership is a protected legal entity, separate from the partners' affairs.

Answer 1

1. A purchaser has agreed to purchase the shares of a qualified small business corporation. Which of the following is notapplicable?

a. The purchaser may try to discount the value of the shares if a future sale of the assets may result in a tax liability..

Reason: the above attempt leads to Tax evation and its illegal

2. Which of the following statements regarding partnerships is TRUE?

c. Partnerships may earn business income, property income, and capital gains.

REASON: A Partnership can earn Business Income during due course of business, Property income when any property is rented out by partnership other than the partnership is into real estate and capital gain can be occured in sale of any asset to anyone other than partners itself

3. A purchaser has agreed to purchase all of the shares of Tee Co., a CCPC. Tee Co. owns fifteen significant capital assets, all of which have appreciated in value. Which of the following is TRUE?

c. Capital cost allowance will be based on higher asset values for the purchaser than was the case for the vendor.

REASON : After purchase purchaser is the owner of the assets, Capital cost allowance will be based on his asset value

4. Sam wishes to purchase Kitchen Cabinets, Inc. (KCI) Which of the following is TRUE if Sam purchases the assets of the corporation rather than the shares from the company's sole shareholder, Brent?

d. Brent will be eligible to use for the capital gains deduction on the sale.

REASON: Sam had purchased the assets of the corporation not shares so capital gain is araised

5. Which of the following statements regarding partnerships is true?

a. A corporation cannot act as a partner.

REASON: A corporation have no power to act as a partner in a partnership firm as per the law