Question

Question 25

1. State sales taxes tend to be regressive in that higher income-people save and invest rather than consuming all their income like lower-income people, so they pay a lower portion of their income on sales taxes which are consumption based. To offset this regressivity, most state sales tax rules do what?

   		Base sales tax rate on the level of income of the purchaser.
   		Rebate excess sales taxes paid to low income taxpayers on application.
   		Exempt certain necessities that all people must buy, like medicine and food.
   		Exempt low income people from having to pay sales tax.

2 points

Question 26

1. Why are S corporation allocations of income, deduction, credits, etc. simpler to calculate than allocations for partnerships?

   		Partnership allocations are not based on how long the partner owned the partnership duriing the year, while S corporation allocations are based on per-day of ownership.
   		S corporations allocations are based on the articles of incorporation, while partnerships are equal for all partners.
   		They are both pass-through organizations, and the allocations are equally complex.
   		Partnerships have possibly disproportionate allocations.

2 points

Question 27

1. John is a citizen of the U.S. and owns an office building in Sweden and earns $100,000 in rents. Sweden asserts source-based income tax nexus and collects $45,000 in taxes on John's rental income in their country. The U.S. asserts residence-based income tax and taxes John's rental income even though it was earned in Sweden. John's U.S. tax on the rental income is $37,000. How much foreign tax credit can John claim for the taxes he had to pay Sweden?

   		$0
   		$45,000
   		$37,000
   		$100,000

2 points

Question 28

1. Which of the following is not information required to be included in an S corporation income tax return?

   		Each shareholder’s adjusted basis in the corporation’s stock.
   		Number of shares owned by each shareholder at all times during the tax year.
   		Items of gross income and allowable deductions.
   		Names and addresses of all persons owning stock in the corporation at any time during the tax year.

2 points

Question 29

1. Mr. Bravo received a distribution from an S corporation that was in excess of the basis of his stock in the corporation. The S corporation had no accumulated earnings and profits. Mr. Bravo should treat the distribution in excess of his basis as

   		A capital gain.
   		A reduction in the basis of his stock.
   		A return of capital.
   		Previously taxed income.

2 points

Question 30

1. Which of the following does not reflect the residence-based jurisdiction approach to multinational taxation?

   		Australia taxes the income of its citizens wherever it is earned in the world.
   		France taxes income that is earned within its borders.
   		The U.S. taxes worldwide income companies that are incorporated in the U.S.
   		Germany's income tax requires its citizens to pay tax on dividends earned in Belgium.

Answer 1

25. Exempt certain necessities that all people must buy, like medicine and food.

26. They are both pass-through organizations, and the allocations are equally complex.

27. $37,000

28. Number of shares owned by each shareholder at all times during the tax year.

29. Capital Gains

30. France taxes income that is earned within its borders

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