Acc 455 week 1 discussion question 1

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This file ACC 455 Week 1 Discussion Question 1 includes
solutions to the following task: "Do the following decisions
have the same precedential value: (1) Tax Court regular
decisions, (2) Tax Court memo decisions (3) decisions under
the small cases procedure of the Tax Court? Why? Which of
the following sources do you think would be most beneficial
for your client: (1) Tax Court regular decisions, (2) Tax Court
memo decisions, (3) decisions under the small cases
procedure of the Tax Court, or (4) Fifth Circuit Court of
Appeals?"
General Questions - General General Questions
1) Which of the following statements regarding proposed
regulations is not correct?
A. Proposed and temporary regulations are generally
issued simultaneously.
B. Proposed regulations do not provide any insight into the
IRS's interpretation of the tax law.
C. Proposed regulations expire after 3 years.
D. Practitioners and other interested parties may comment
on proposed regulations.
2) Regulations are
A. presumed to be valid and to have almost the same
weight as the IRC
B. equal in authority to legislation if interpretative

2. C. equal in authority to legislation
D. equal in authority to legislation if statutory
3) Which of the following courts is not a trial court for tax
cases?
A. U.S. Tax Court
B. U.S. Court of Federal Claims
C. U.S. Bankruptcy Court
D. U.S. District Court
4) Which of the following statements is incorrect?
A. Limited partners' liability for partnership debt is limited
to their amount of investment.
B. In a general partnership, all partners have unlimited
liability for partnership debts.
C. In a limited partnership, all partners participate in
managerial decision-making.
D. All of the statements are correct.
5) Which of the following is an advantage of a sole
proprietorship over other business forms?
A. Low tax rates on dividends
B. Ease of formation
C. Tax-exempt treatment of fringe benefits
D. The deduction for compensation paid to the owner
6) Which of the following statements is correct?
A. S shareholders are taxed on their proportionate share of
earnings that are distributed.
B. S shareholders are taxed on their proportionate share of
earnings whether or not distributed.

3. C. An owner of a C corporation is taxed on his or her
proportionate share of earnings.
D. S shareholders are only taxed on distributions.
7) Three members form an LLC in the current year. Which of
the following statements is incorrect?
A. The LLC can elect to be taxed as a C corporation with no
special tax consequences.
B. If the LLC elects to use its default classification, it can
elect to change its status to being taxed as a C corporation
beginning with the third tax year after the initial
classification.
C. The LLC's default classification under the check-the-box
rules is as a partnership.
D. The LLC can elect to have its default classification
ignored.
8) Identify which of the following statements is true.
A. Under the check-the-box regulations, an LLC that has
one member (owner) may be disregarded as an entity
separate from its owner.
B. An unincorporated business may not be taxed as a
corporation.
C. A new LLC that is owned by four members elects to be
taxed under its default classification (as a partnership) in its
first year of operations. The entity is prohibited from
changing its tax classification at any time in the future.
D. All are false.
9) Identify which of the following statements is true.
A. The check-the-box regulations permit an LLC to be taxed

4. as a C corporation.
B. Under the check-the-box regulations, an LLC that has
only two members (owners) default classification is as a
partnership.
C. Once an election is made to change its classification, an
entity cannot change again for 60 months.
D. All of the statements are true.
10) Rose and Wayne form a new corporation. Rose
contributes cash for 85% of the stock and Wayne contributes
services for 15% of the stock. The tax effect is
A. Rose and Wayne are not required to recognize their
realized gains.
B. Wayne must report the FMV of the stock received as
capital gain.
C. Rose and Wayne must recognize their realized gains, if
any.
D. Wayne must report the FMV of the stock received as
ordinary income.
11) Matt and Sheila form Krupp Corporation. Matt
contributes property with a FMV of $55,000 and a basis of
$35,000. Sheila contributes property with a FMV of $75,000
and a basis of $40,000. Matt sells his stock to Paul shortly
after the exchange. The transaction will
A. qualify with respect to Sheila under Sec. 351 whether
Matt qualifies or not
B. qualify under Sec. 351 if Matt can show the sale to Paul
was not part of a prearranged plan
C. not qualify under Sec. 351
D. qualify under Sec. 351 only if an advance ruling has been

5. obtained
12) For Sec. 351 purposes the term property does not include
A. inventory
B. accounts receivable
C. cash
D. services rendered
13) Identify which of the following statements is true.
A. In computing an NOL for the current year, a deduction is
allowed for NOLs from previous years.
B. An election to forgo an NOL carryback must be made on
or before the return due date (including extensions) for the
year in which the NOL is incurred.
C. A corporate NOL can be carried back 2 years and
forward 15 years.
D. All are false.
14) A new corporation may generally select one of the
following accounting methods with the exception of
A. retail method
B. accrual method
C. cash method
D. hybrid method
15) Identify which of the following statements is false.
A. A new corporation can elect a fiscal year that runs from
February 16 to February 15 of the following year.
B. A fiscal year may not end on December 31.
C. A corporation's fiscal year generally must end on the last
day of the month.

6. D. A corporation's first tax year may not cover a full 12-
month period.
16) Edison Corporation is organized on July 31. The
corporation starts business on August 10. The corporation
adopts a November 30 fiscal year end. The following
expenses are incurred during the year:
Date Type Amount
6-30 Attorneys fees associated with obtaining charter
$10,000
7-10 Underwriter fees for stock sale 25,000
7-15 Transfer cost for property contributed to the
corporation for stock 3,000
6-30 Costs of organizational meetings 2,000
12-6 Legal fees to modify charter 4,000
What is the maximum amount of organizational expenditures
that can be deducted by the corporation for its first tax year
ending November 30?
A. $5,156
B. $12,000
C....
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