Reference no: EM131750934

1) Which of the following statements is false?

A. Limited Partnerships do not need to file anything with the state to establish their legal existence because a partnership may be established by a verbal agreement among two or more persons to share profits from a trade or business.

B. Distributions of appreciated property by a C corporation generally produce immediate tax consequences to both the C corporation and its shareholders.

C. Distributions of appreciated property by a partnership to its partners generally are NOT an immediate taxable event to either the partnership nor the partners because the potential taxable gain is deferred through the basis mechanism until such time as the partner receiving the distribution sells the property.

D. Partnerships are more flexible than S corporations when a non-resident alien wants to own an interest in the entity.

2) Which of the following statements is false?
A. C corporations can be more flexible than S corporations if the taxpayers wish to have both preferred and common stock issued by the corporation.

B. A useful strategy for a C Corporation to avoid double taxation is to pay its shareholders salary which can be deducted against the corporation's profits.

C. C corporations can be more useful than S corporations if one of the shareholders of the corporation has to be a non-resident alien.

D. The disadvantage of double taxation of C corporations can be mitigated to a some degree if the corporation reinvests all its profits back into the business and the corporation does not make any distributions of appreciated property to its shareholders.

E. A The stock basis of a C corporation shareholder is increased by corporate income.