1. An S corporation cannot incur a tax liability at the corporation level. a. True b. False 2. S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis). a. True b. False 3. An estate may be a shareholder of an S corporation. a. True b. False 4. An S corporation cannot be a shareholder in another corporation. a. True b. False 5. If a resident alien shareholder moves outside the U.S., the S election is terminated. a. True b. False 6. An S election is made on the shareholder’s Form 2553. a. True b. False 7. An S election made before becoming a corporation is valid only beginning with the first 12-month tax year. a. True b. False 8. For Federal income tax purposes, a business entity with two or more owners may be conducted as a partnership, C corporation, S corporation, or limited liability company. a. True b. False 9. If a business entity has a majority of corporate characteristics, it is taxed as a corporation. a. True b. False 10. A limited liability company (LLC) is a hybrid business form that combines the corporate characteristic of limited liability for the owners with the tax characteristics of a partnership. a. True b. False 11. A sole proprietorship files Schedule C of Form 1040, a partnership files Form 1065, a C corporation files Form 1120, and an S corporation files Form 1120S. a. True b. False 12. Each of the following can pass profits and losses through to the owners: general partnership, limited partnership, S corporation, and limited liability company. a. True b. False 13. A C corporation offers greater flexibility in terms of the types of owners and capital structure than an S corporation. a. True b. False 14. All of the shareholders of an S corporation have limited liability with respect to their ownership interests in the corporation, whereas only limited partners in a limited partnership have such limited liability. a. True b. False 15. In general, the purpose of ASC 740 (SFAS 109) is to compute and disclose the taxes payable by a business entity to state, local, Federal, and foreign governments, for the current year and all future years. a. True b. False 16. A deferred tax asset is the expected future tax benefit (savings) associated with income reported in the current year GAAP financial statements. a. True b. False 17. All organizations that are exempt from Federal income tax are exempt under § 501(c)(3). a. True b. False 18. An exempt entity in no circumstance is subject to Federal income tax. a. True b. False 19. Most states begin the computation of corporate taxable income with an amount from the Federal income tax return. a. True b. False 20. A state can levy an income tax on a business only if the business was incorporated in the state. a. True b. Fa.