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ANSWER: False
RATIONALE: A partnership is not a taxpaying entity. Its profit (loss) and separate items flow
through to the partners. The partnership’s Form 1065 reports net profit of $75,000.
Carol and Candace both receive a Schedule K-1 reporting net profit of $37,500.
Each partner reports net profit of $37,500 on her own return (Form 1040). Each is
likely eligible for a deduction for qualified business income on the income from the
partnership.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True /
False HAS VARIABLES:
False
LEARNING OBJECTIVES: CPET.SWFT.2020.LO: 2-01 - LO: 2-01
NATIONAL STANDARDS: United States - BUSPROG:
Comprehension STATE STANDARDS: United States - AK -
AICPA: FN-Reporting KEYWORDS: Bloom's: Application
OTHER: Time: 2 min.
DATE CREATED: 1/9/2019 1:37 PM
DATE MODIFIED: 2/23/2019 2:05
PM
ANSWER: True
RATIONALE: Similar to partnerships, the net profit or loss of an S corporation flows through to
the shareholders to be reported on their individual tax returns. Robin’s net
income of
$350,000 is allocated entirely to Rajib as the sole shareholder, and Rajib reports the
$350,000 of income on his Federal income tax return regardless of how much of
the income was withdrawn from the S corporation.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True /
False HAS VARIABLES:
False
LEARNING OBJECTIVES: CPET.SWFT.2020.LO: 2-01 - LO: 2-01
NATIONAL STANDARDS: United States - BUSPROG:
Comprehension STATE STANDARDS: United States - AK -
AICPA: FN-Reporting KEYWORDS: Bloom's: Application
OTHER: Time: 2 min.
DATE CREATED: 1/9/2019 1:37 PM
DATE MODIFIED: 2/23/2019 2:05
PM
ANSWER: True
RATIONALE: On his individual income tax return for the year, Donald must report his $58,500
($130,000 × 45%) share of the partnership income plus the $20,000 of dividends he
received from the C corporation, or $78,500 of total income. Partnership income is
taxed to a partner in the year earned, and distributions do not affect a partner’s share
of income. A C corporation’s income is taxed to a shareholder only when distributed
as dividends and to the extent thereof. Donald should be eligible for a deduction for
qualified business income on his partnership business income.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True /
False HAS VARIABLES:
False
LEARNING OBJECTIVES: CPET.SWFT.2020.LO: 2-01 - LO: 2-01
NATIONAL STANDARDS: United States - BUSPROG:
Comprehension STATE STANDARDS: United States - AK -
AICPA: FN-Reporting KEYWORDS: Bloom's: Application
OTHER: Time: 2 min.
DATE CREATED: 1/9/2019 1:37 PM
DATE MODIFIED: 2/23/2019 2:05
PM
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