Exam 11: S Corporations

Gofer Corporation, an S corporation, is owned equally by Mahmoud and Kwame. The corporation had long-term capital gains of $100,000 and ordinary income of $90,000 for the current year and made no distributions. What is the amount of ordinary income from S corporation activities that Mahmoud must report?

Helmut and Sergei own all the stock of Zappo Corporation, a calendar-year domestic corporation. On January 30 of the current year, Sergei sells his entire interest in the Zappo stock to Nils. All three individuals are U.S. citizens. Can an S election be made for the current year?

Identify which of the following statements is true.

For an S corporation to elect to use a fiscal year other than a permitted year, the fiscal year elected must have a maximum deferral period of

Identify which of the following statements is false.

An S corporation is not treated as a corporate taxpayer with respect to which one of the following fringe benefits?

Rocky Corporation, an S corporation, reports the following results for the current year: Ordinary income $70,000 Long-term capital gain 20,000 Municipal bond interest income 10,000 Domestic corporate dividends 6,000 Charitable contributions 16,000 Rocky's AAA and accumulated E&P balances at the beginning of the year are $80,000 and $50,000, respectively. Rocky makes a $100,000 cash distribution to its sole shareholder on June 1 and a second $100,000 cash distribution on December 1. The shareholder's basis for Rocky stock on January 1 was $120,000. Discuss the tax consequences of these transactions.

Trusts that can own S corporation stock include all of the following except

Corporations and partnerships can be S corporation shareholders.

Identify which of the following statements is true.

Which of the following statements about stock ownership is not correct?

When a Sec. 444 fiscal-year election is made, the S corporation makes required payments to the IRS in order to continue to use the fiscal year as its tax year. Which of the following statements about the tax year is correct?

The S corporation rules were enacted to allow small corporations to enjoy the nontax advantages of the corporate form of business without being subject to the tax disadvantage of double taxation.

Identify which of the following statements is true.

A testamentary trust can be an S shareholder for two years, beginning on the date the stock transfers to the trust.

S shareholders cannot increase the basis of their stock by a ratable share of the general S corporation liabilities.

S shareholders are allocated shares of income, gain, loss, deduction, and credit based on their number of shares of stock and period of time for which the stock is held.

Jeff owns 50% of an S corporation's stock with a basis in his stock of $50,000 on January 1. In addition, the S corporation owes Jeff $30,000 on January 1. The debt has a basis of $30,000 and is evidenced by a note. The S corporation reports an ordinary loss of $150,000 for the current year. The next year, it reports ordinary income of $20,000. On January 1 of the third year, the note is repaid. Due to the repayment of the note, Jeff must report what?

Swamp Corporation, a calendar-year taxpayer, has been an S corporation for several years. However, the corporation has become quite profitable, and management feels that it would be advantageous to make a public stock offering. What are Swamp Corporation's options concerning the date of revocation of the S election?

Boxer Corporation, a C corporation, elects on June 30 of last year to make an S election for the current year. The net unrealized built-in gains at the beginning of the current year are $300,000. The net recognized built-in gains in the current year are $110,000. What is Boxer's built-in gains tax for the current year?