Principles Of Taxation 2020 23rd Edition By Sally Jones – Test Bank

Principles of Taxation for Business and Investment Planning, 23e (Jones)
Chapter 11 The Corporate Taxpayer

1) In terms of dispersal of ownership, corporations are classified as either closely held or publicly held.

Answer: TRUE
Difficulty: 1 Easy
Topic: Legal Characteristics of Corporations
Learning Objective: 11-01 Identify the four primary legal characteristics of corporations.
Accessibility: Keyboard Navigation
Type: Static
Gradable: automatic

2) The corporate characteristic of limited liability is generally more important to the shareholders than the characteristic of centralized management.

3) The stock of closely held corporations is typically restricted as to transferability by some type of buy-sell agreement and cannot be sold on the open market.

Answer: TRUE
Difficulty: 2 Medium
Topic: Legal Characteristics of Corporations
Learning Objective: 11-01 Identify the four primary legal characteristics of corporations.
Accessibility: Keyboard Navigation
Type: Static
Gradable: automatic

4) The federal tax law considers the member corporations of an affiliated group to be a single entity for federal tax purposes.

5) At least three corporations are required to form an affiliated group.

Answer: FALSE
Difficulty: 1 Easy
Topic: Legal Characteristics of Corporations
Learning Objective: 11-01 Identify the four primary legal characteristics of corporations.
Accessibility: Keyboard Navigation
Type: Static
Gradable: automatic

6) An affiliated group consists of a parent company that directly owns 80% of at least one subsidiary corporation plus all other subsidiaries that are 80% owned within the group.

7) The corporate characteristic of free transferability exists if the corporate stock is subject to a buy-sell agreement.

8) A nonprofit corporation may incur a federal income tax if it has unrelated business income.

9) After 2017, a 1.4% excise tax applies to the net investment income of all colleges and universities.

10) After 2017, a 37% excise tax applies to compensation in excess of $1 million paid to executives of tax-exempt organizations.