Question

Question 1 (1 point)

At a staff meeting, Carey and Paul, CPAs in the Miller CPA Firm, are debating the tax treatment of the qualified business income (QBI) deduction. Miller has a variety of tax clients ranging from individuals to partnerships to C and S corporations. Regarding the QBI deduction, it applies to income from which of the following entity types?

Question 1 options:

	S Corporation
	C corporation
	Limited Liability Company (LLC)
	S Corporation and C Corporation only
	S Corporation and LLC only
	S Corporation, C Corporation, and LLC

Question 2 (1 point)

Stella C., an individual and U.S. citizen, owns a pack and ship business in Miami. She is the only owner. Currently, Stella's business is organized as a sole proprietorship. Stella was advised by her accountant to consider another business structure principally for personal liability reasons. In advising Stella regarding the choice of another business entity form, which of the following statements are correct?

Question 2 options:

	Stella can form an LLC. By default, the LLC would be taxed as a partnership, but Stella can elect to be taxed as a proprietorship.
	Stella can form a corporation. By default, the corporation would be taxed as a proprietorship because Stella is the sole owner. However, Stella can elect to be taxed as a corporation by filing a form with the IRS.
	Stella can form an LLC. By default, the LLC would be taxed as a proprietorship, but Stella can elect to be taxed as a corporation by filing a form with the IRS.
	Stella can form a corporation. By default, the corporation would be taxed as as a C corporation. However, Stella can elect to be taxed as an LLC by filing a form with the IRS.
	None of the above answers are correct.

Question 3 (2 points)

Use the facts from the question above for Stella's pack and ship shop. Stella is considering admitting a new owner to her business to obtain capital for expansion in the local area. Regarding a potential owner, which of the following statements are correct? Select all correct answers. Your score will be the number of correct answers minus the number of incorrect answers.

Question 3 options:

	If Stella is an LLC and admits a new owner, her LLC by default will be taxed as a partnership.
	If Stella is a C corporation and she admits a new owner, her corporation by default will be taxed as an S corporation.
	If Stella is an S corporation and she admits a new owner who is a nonresident alien, by default her corporation will be taxed as an C corporation.
	If Stella is an LLC and admits a new owner, her LLC by default will be taxed as a C corporation.

Question 4 (1 point)

Mike, K., an individual and U.S. citizen, started a motorcycle customization shop (BikeSix, Inc.) in Savannah in 2018. Mike organized the business as a C corporation. He is the only owner. During 2020, due to declining ridership from the Covid-19 virus, Mike's business realized a net operating loss of $34,000. The business was profitable in 2018 and 2019 with profits of 12,000 and $54,000, respectively. After preparing Mike's 2020 return, you'll have a phone conference to discuss his reporting options. Regarding the 2020 NOL, which of the following are correct?

Question 4 options:

	Because Mike is the sole owner of a C corporation, he cannot carry his loss back and can only carry it forward 10 years.
	Mike cannot carry the NOL back to 2018 or 2019 but he can carry the loss forward indefinitely, subject to potential taxable income limitations.
	Mike can carry the NOL back to 2018 and 2019 but he can carry the loss forward only 20 years, with no potential taxable income limitations.
	Mike can carry the NOL back to 2019 only, but he can carry the loss forward indefinitely, subject to potential taxable income limitations.
	Mike cannot carry the NOL back to 2018 or 2019 but he can carry the loss forward indefinitely, with no potential taxable income limitations.

Question 5 (1 point)

Client Kayla is forming a business and seeks tax counsel regarding the benefits of alternative entity forms. If her business loses money the first year or two, this loss can be deducted on her individual tax return if she is a C corporation, but not an S corporation.

Question 5 options:

	True
	False

Please help taking practice problems

Answer 1

1. Regarding the QBI deduction, it applies to income of the entity of Limited Liability Company.

2. Advice  regarding the choice of another business entity form is the below option:-

Stella can form a corporation. By default, the corporation would be taxed as a proprietorship because Stella is the sole owner. However, Stella can elect to be taxed as a corporation by filing a form with the IRS.

3. The option which afre correct are as below:

a) If Stella is an LLC and admits a new owner, her LLC by default will be taxed as a partnership.

b) If Stella is a C corporation and she admits a new owner, her corporation by default will be taxed as an S corporation.

4.  Mike cannot carry the NOL back to 2018 or 2019 but he can carry the loss forward indefinitely, subject to    potential taxable income limitations.

5. False :-  If her business loses money the first year or two, this loss can be deducted on her individual tax return if she is a C corporation as well as S corporation.