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8. Chapter 2: C corporations are flow-through entities in which income is allocated to shareholders. A) True B) False 9. Chapter 2: Sec. 351 applies to an exchange if the contributing shareholders own more than 80% of a corporation's stock after the transfer. A) Truc B) False 10. Chapter 2: Jacob owns all 200 shares of Aggie Corporation stock valued at $50,000. Jordan, a new shareholder, receives 200 newly-issued shares from Aggie Corporation in exchange for inventory with an adjusted basis of $40,000 and a FMV of $50,000. Which of the following statements is correct? A) No gain will be recognized by Jordan. B) Jordan may defer the recognition of any tax until the stock is sold. C) The transaction results in $10,000 of ordinary income for Jordan. D) The transaction results in $10,000 of capital loss for Jordan. 11. Chapter 2: Jordan transfers land having a $50,000 adjusted basis, an $80,000 FMV and $10,000 cash to Aggie Corporation in exchange for 100% of Aggie's stock. The corporation assumes the $70,000 mortgage on the land. Which of the following statements is correct? A) Jordan recognizes $10,000 gain and the stock basis is zero. B) Jordan recognizes no gain and the stock basis is $50,000. C) Jordan recognizes $10,000 gain and the stock basis is $60,000. D) Jordan recognizes no gain and the stock basis is $60,000. 12. Chapter 2: Which of the following statements about a partnership is true? A) A partnership is not a taxpaying entity. B) Partners are generally taxed on distributions from a partnership. C) Partners are taxed on their allocable share of income only when it is distributed. D) Partners are considered employees of the partnership. 13. Chapter 2: Which of the following statements is correct? A) An owner of a C corporation is taxed on his or her proportionate share of earnings. B) S corporation shareholders are taxed on earnings. C) S corporation shareholders are taxed on their proportionate share of earnings only when they are distributed. D) None of the above. 14. Chapter 2: Identify which of the following statements is false. A) A solely-owned corporation is the same as a sole proprietorship. B) A sole proprietorship is not a separate taxable entity. C) A sole proprietor is not considered to be an employee of the business. D) All are false

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