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10/19/2018
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Course 651001- Minimize Federal Business Taxes
  Final Exam
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651001v - Minimize Federal Business Taxes

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Taxation
10 CPE Credit Hours

10/19/2018
Final Exam
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Read 'Chapter 1: Pay No Income Taxes' & answer the following question(s):
1. Nonpassive means that you will have to participate actively.
2. The IRS computer now matches most W-2s and 1099 forms to individual tax returns.
Read 'Chapter 2: Organize Your Business for the Smallest Tax Bite' & answer the following question(s):
3. If you expect a gain and you have significant other income, operating as a sole proprietorship makes sense.
4. If you expect a loss and you have significant other income, operating as a sole proprietorship makes sense.
5. The extra penalty for accumulating corporate profits can be avoided if:
6. The extra penalty for accumulating corporate profits can be avoided if you convince the IRS that the profit was kept to meet contingent liabilities.
7. Personal service corporations are corporation that provide services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting.
8. Personal service corporations are taxed at the same graduated corporation tax scale that applies to other corporations.
9. Each partner in a general partnership has unlimited liability for the partnerships debts.
10. Each limited partner in a limited partnership has limited liability for the partnerships debts.
11. A Limited Liability Company (LLC) is taxed like a partnership.
12. A Limited Liability Company (LLC) is taxed like a corporation.
Read 'Chapter 3: Jump into Business and Keep the IRS from Becoming a Greedy Partner' & answer the following question(s):
13. A business owner, operating as a S-Corp, can reduce social security taxes by paying himself less salary and more dividends.
14. Dividends are not subject to Social Security tax.
15. The Section 179 Election allows an individual or corporation to take an immediate deduction for the year in which the equipment was purchased instead of depreciating the cost over time, up to certain limits.
16. There is no Section 179 election for amortization.
17. Amortization is a method for deducting some intangible costs over time.
18. Software development costs are deducted immediately.
19. Advertising costs are deducted immediately.
20. Advertising costs are deducted when the revenue from the advertising is recognized.
Read 'Chapter 4: Keep Two or More Sets of Books (Legally) and Other Accounting Tricks' & answer the following question(s):
21. With the accrual method, expenses are recognized when they are incurred, not when they are paid.
22. With the cash method, income is recognized when received. Expenses are recognized when paid.
23. Businesses which buy and sell merchandise for resale must record sales and cost of goods sold on a cash basis.
24. Businesses which buy and sell merchandise for resale must record sales and cost of goods sold on an accrual basis.
26. You may lose a net operating loss carryforward from a C-Corp if you elect S-Corp status
Read 'Chapter 5: Change Personal Expenses into Business Tax Deductions' & answer the following question(s):
25. The principle test for determining employee vs. contractor is that of control and direction.
27. Filing Form SS-8 requests a ruling from the IRS as to the status of a worker as employee or contractor.
28. Deducting business expenses is easier for a self-employed person than a salaried person.
29. The IRS may call income "hobby income" merely because the owner finds pleasure in the endeavor.
30. If a business shows a profit in three out of five consecutive years, it may be presumed to be a business rather than a hobby.
31. The three out of five years safe harbor test, shifts the burden of proof from the taxpayer to the IRS.
32. Horse farms that breed, show, train and race horses need show a profit in two out of seven consecutive years to be presumed to be a business rather than a hobby.
33. If you travel out of the U.S. for more than seven days, you have to allocate your expenses between time spent on business and time spent on pleasure.
34. One way to make a lot of travel a deductible expense is to be in a business for which travel is an essential ingredient.
35. If education qualifies you for a new trade or business or is necessary for the minimum skill levels for your present position, the education is a personal, nondeductible expense.
36. You can deduct as legitimate business expenses, the cost of education that maintains or improves the skills necessary for your present job or business.
Read 'Chapter 6: Taking Money Out of Your Business' & answer the following question(s):
37. Tax on dividends is essentially paid twice, once by the corporation when it earned profit from which the dividends will be paid, and once by the stockholder when they receive the dividends.
38. Draw refers to the cash that a sole proprietor takes out of his business.
39. Borrowing money from your C Corp is always considered taxable income to you.
40. Loan proceeds from your C Corp used for personal nonmortgage purposes is likely to be nondeductible to you personally and taxable income to your C Corp.
Read 'Chapter 7: Spread the Tax Burden Around the Family' & answer the following question(s):
41. If your child is under 18 and works for your sole proprietorship, neither your child nor you are subject to social security taxes on the child's wages.
42. If your child is under 18 and works for your sole proprietorship, you are subject to social security taxes on the child's wages.
43. For estate tax purposes, the IRS will compute the value of your business by various methods, relying on the "facts and circumstances" of each case.
44. Income tax rates on the income that an estate or trust earns are considerable higher than the tax rates on individuals.
Read 'Chapter 8: Pay Taxes Late, Years Late, Without Penalty or Interest' & answer the following question(s):
45. Publishers of periodicals are not allowed to immediately deduct all expenditures to establish, maintain, or increase the circulation of a newspaper, magazine or other periodical, regardless of when the revenue for these expenditures shows up.
46. A publisher of periodicals, using the accrual method, is allowed to defer paying tax on receipts for subscriptions until receipts have been paid.
Read 'Chapter 9: Don't Ignore the Alternative Minimum Tax (AMT)' & answer the following question(s):
47. You are required to fill out Form 6251 if your tax return contains a NOL.
48. You are required to fill out Form 6251 if you itemize on Schedule A.
Read 'Chapter 10: Select and Use Professional Help' & answer the following question(s):
49. An IRS appeals officer can make settlements with taxpayers.
50. Enrolled agents cannot represent you before the IRS.
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