WEEK 2

Which of the following is the characteristic of a corporation?

• A corporation is a legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that individuals possess.

• An important element of a corporation is limited liability.

• Corporations are not always for profit.

• All of the above

Which of the following statements is not true with regards to FICA?

• The employee must file returns and deposit the withheld income tax and the FICA tax with an authorized commercial bank depository or a Federal Reserve bank.

• The employee portion must be withheld by the employer corporation from each payment of taxable wages until a designated amount of taxable wages has been reached.

• FICA requires both employers and employees to contribute a stated percentage of wages paid in order to provide old age, medical, survivors and disability benefits to employees.

• The corporation is required to annually furnish each employee with a statement of wages paid and taxes withheld during the previous calendar year.

Which of the following statements is not true?

• Property taxes are levied upon the ownership or use of property or upon the property itself.

• A corporation will automatically be subject to the state income tax of its state of incorporation if it does business in or has income derived from that state.

• A state may include the corporation’s entire capital stock or income, even if the corporation is engaged in business and employing its capital primarily in a foreign state.

• State corporate income taxes are taxes imposed upon the gross amount involved in certain transactions.

Statement 1: A corporate taxpayer is required to file an annual tax return (generally Form 1120) by the 15th day of the fourth month following the close of its tax year.

Statement 2: A taxpayer can obtain an additional six-month extension of time to file its tax return.

• Only statement 1 is true

• All statements are true

• Only statement 2 is true

• All statements are false

Which of the following best describe a S-corporation?

• Subject to double taxation

• Does not have to pay corporate income taxes

• Must file a federal tax return and pay federal taxes on income it earned

• None of the above

Which statement is false?

• Payments for the services of a child under age 21 who works for his or her parent in a trade or business are not subject to Federal Unemployment Tax Act (FUTA) tax.

• The wages for the services of a parent employed by his or her child in a trade or business are subject to income tax withholding and social security and Medicare taxes.

• The wages for the services of a parent employed by his or her child in a trade or business are subject to income tax withholding, social security, Medicare, and FUTA tax.

• Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child.

You may use the cost incurred or the fair market value to determine the value of fringe benefit.

• True

• False

Who among the following are considered as statutory employees?

• An individual who works at the factory on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.

• They do not have a substantial investment in the equipment and property used to perform the services.

• Both A and B

• None of the statements

Which of the following is true with regards to Leased Property?

• If the lessee makes permanent improvements to lease property, then the cost can be depreciated with the Modified Accelerated Cost Recovery System (MACRS) depreciation over the recovery period of the improvement.

• If it is not clear from the contract whether the agreement is a lease or a conditional sales contract, then another determining factor is consent.

• Improvements to leaseholds, restaurants, and retail establishments, by either the landlord or tenant, can be depreciated over 39- year class if the leasehold improvements are for interior of the building.

• If the lease is for the current tax year, then any premium paid to obtain immediate possession is nondeductible.

Motor vehicle rentals for less than X days are immediately deductible. Lease terms exceeding X days are deductible if the car was used entirely for business. What is X?

• 20

• 25

• 15

• 30