Question 1

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

Accepted Answer

A) one month. 
B) two months. 
C) three months. 
D) six months. 
A) one month. 
B) two months. 
C) three months. 
D) six months. C

Question 2

What is a permitted year?

Accepted Answer

A permitted year is defined as a taxable year ending on December 31 (including a 52-53 week year)or any fiscal year for which the corporation established a business purpose.

Question 3

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.

Accepted Answer

A) True 
 B)False  True

Question 4

Identify which of the following statements is true.

Accepted Answer

A) Convertible debt issues might be considered "stock" for purposes of the S corporation single class of stock requirement. 
B) The S election must be made no later than the fifteenth day of the fourth month of the tax year for which the election is to be effective. 
C) A majority of shareholders must consent to the S corporation election. 
D) All of the above are false. 
A) Convertible debt issues might be considered "stock" for purposes of the S corporation single class of stock requirement. 
B) The S election must be made no later than the fifteenth day of the fourth month of the tax year for which the election is to be effective. 
C) A majority of shareholders must consent to the S corporation election. 
D) All of the above are false.

Question 5

Identify which of the following statements is true.

Accepted Answer

A) Long-term capital gains may be subject to double taxation if the gains are subject to both the excess net passive income tax rules and the built-in gains tax rules. 
B) Special allocations of ordinary income or loss and separately stated items that are available for partnerships are also permitted with S corporations. 
C) When an S corporation's shares are sold by a shareholder during a tax year,the transferee's share of the earnings is reported from the day after the transfer date through the end of the tax year. 
D) All of the above are false. 
A) Long-term capital gains may be subject to double taxation if the gains are subject to both the excess net passive income tax rules and the built-in gains tax rules. 
B) Special allocations of ordinary income or loss and separately stated items that are available for partnerships are also permitted with S corporations. 
C) When an S corporation's shares are sold by a shareholder during a tax year,the transferee's share of the earnings is reported from the day after the transfer date through the end of the tax year. 
D) All of the above are false.

Question 6

Identify which of the following statements is false.

Accepted Answer

A) The AAA balance can be negative,but the shareholder's basis in the S corporation stock cannot be less than zero. 
B) The AAA represents the cumulative income/loss recognized in post-1982 S corporation years. 
C) Nonmoney property distributions made by an S corporation having accumulated E&P are treated differently when determining the corporate-level gain recognized under Sec.311 than are property distributions made by an S corporation without accumulated E&P. 
D) Tax-exempt income does not increase the AAA but increases the basis of the S corporation stock. 
A) The AAA balance can be negative,but the shareholder's basis in the S corporation stock cannot be less than zero. 
B) The AAA represents the cumulative income/loss recognized in post-1982 S corporation years. 
C) Nonmoney property distributions made by an S corporation having accumulated E&P are treated differently when determining the corporate-level gain recognized under Sec.311 than are property distributions made by an S corporation without accumulated E&P. 
D) Tax-exempt income does not increase the AAA but increases the basis of the S corporation stock.

Question 7

Identify which of the following statements is false.

Accepted Answer

A) An S corporation files a Form 1120S corporate income tax return on or before the 15th day of the fourth month following the close of its tax year. 
B) An S corporation's ordinary income or loss is reported by an individual shareholder on Schedule E of Form 1040. 
C) An S corporation that owes the built-in gains tax or the excess net passive income tax must make quarterly estimated tax payments. 
D) An S corporation cannot use the prior-year tax liability exception when determining the required payment to be made with respect to the built-in gains tax. 
A) An S corporation files a Form 1120S corporate income tax return on or before the 15th day of the fourth month following the close of its tax year. 
B) An S corporation's ordinary income or loss is reported by an individual shareholder on Schedule E of Form 1040. 
C) An S corporation that owes the built-in gains tax or the excess net passive income tax must make quarterly estimated tax payments. 
D) An S corporation cannot use the prior-year tax liability exception when determining the required payment to be made with respect to the built-in gains tax.

Question 8

Which of the following corporate tax levies are imposed on an S corporation?

Accepted Answer

A) corporate income tax 
B) corporate alternative minimum tax 
C) accumulated earnings tax 
D) None of these taxes are imposed on an S corporation. 
A) corporate income tax 
B) corporate alternative minimum tax 
C) accumulated earnings tax 
D) None of these taxes are imposed on an S corporation.

Question 9

Pressley Corporation was incorporated on January 1,2004.The corporation made its S election on March 1,2008.The corporation retains an E&P balance from its C corporation days.During the current year,it made a cash distribution to its sole shareholder Robert Pressley.What is the proper sequence in reducing the corporate earnings accounts for the distribution?

Accepted Answer

A) AAA; E&P 
B) AAA; OAA; E&P 
C) E&P; AAA 
D) AAA; PTI; E&P 
A) AAA; E&P 
B) AAA; OAA; E&P 
C) E&P; AAA 
D) AAA; PTI; E&P

Question 10

An electing S corporation has a $30,000 ordinary loss for the non-leap year.On January 1,Beverly and Sonya own equally all of the S corporation stock.On the 146th day of the year,Beverly gives her one-half of the S corporation stock to her daughter Becky.How much of the $30,000 ordinary loss is allocated to Sonya?

Accepted Answer

A) $25,000 
B) $15,000 
C) $10,000 
D) $6,000 
A) $25,000 
B) $15,000 
C) $10,000 
D) $6,000

Question 11

Identify which of the following statements is true.

Accepted Answer

A) A trust can own S corporation stock and have a C corporation as a beneficiary as long as the corporation is the sole beneficiary. 
B) A QSST is an arrangement whereby the stock owned by a number of shareholders is placed under trust control for purposes of exercising the stock voting rights. 
C) A testamentary trust can be converted into a QSST trust. 
D) All of the above are false. 
A) A trust can own S corporation stock and have a C corporation as a beneficiary as long as the corporation is the sole beneficiary. 
B) A QSST is an arrangement whereby the stock owned by a number of shareholders is placed under trust control for purposes of exercising the stock voting rights. 
C) A testamentary trust can be converted into a QSST trust. 
D) All of the above are false.

Question 12

Which one of the following is not one of the corporation-related requirements for S corporation status?

Accepted Answer

A) The corporation must be a domestic corporation. 
B) The corporation must not have any foreign-sourced income. 
C) The corporation must not be an "ineligible" corporation. 
D) The corporation must have only one class of stock. 
A) The corporation must be a domestic corporation. 
B) The corporation must not have any foreign-sourced income. 
C) The corporation must not be an "ineligible" corporation. 
D) The corporation must have only one class of stock.

Question 13

Dilley Corporation is an electing S corporation that uses a calendar year as its tax year.On October 31,Dilley's S election is terminated because of the acquisition of stock by an ineligible stockholder.Dilley Corporation shareholder Alan is allocated an S corporation loss for the year,which cannot be used because of the basis limitation.Alan will lose the unused loss if not used by

Accepted Answer

A) December 31 of this year. 
B) March 15 of next year. 
C) October 31 of next year. 
D) December 31 of next year. 
A) December 31 of this year. 
B) March 15 of next year. 
C) October 31 of next year. 
D) December 31 of next year.

Question 14

Which of the following items is not separately stated for an S corporation?

Accepted Answer

A) short-term capital gain 
B) dividend income 
C) Section 1245 income 
D) charitable contribution 
A) short-term capital gain 
B) dividend income 
C) Section 1245 income 
D) charitable contribution

Question 15

Identify which of the following statements is true.

Accepted Answer

A) 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. 
B) A partnership can elect to be taxed as a corporation under the check-the-box regulations.As a corporation,an S election can be made. 
C) For C corporations that desire to be taxed like a partnership,the S corporation rules provide a practical alternative for an existing C corporation to obtain many of the tax benefits of being taxed as a partnership. 
D) All of the above are true. 
A) 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. 
B) A partnership can elect to be taxed as a corporation under the check-the-box regulations.As a corporation,an S election can be made. 
C) For C corporations that desire to be taxed like a partnership,the S corporation rules provide a practical alternative for an existing C corporation to obtain many of the tax benefits of being taxed as a partnership. 
D) All of the above are true.

Question 16

Identify which of the following statements is true.

Accepted Answer

A) Fringe benefits limited by the more-than-2%-shareholder rule include stock options,group term life insurance premiums,and medical insurance premiums. 
B) A shareholder owning 2% or more of an S corporation's stock,who is also an employee of the corporation,must include all statutory fringe benefits in gross income on his/her individual return. 
C) Section 318 stock attribution rules are used to define 2% or more shareholders of S corporation's stock. 
D) All of the above are false. 
A) Fringe benefits limited by the more-than-2%-shareholder rule include stock options,group term life insurance premiums,and medical insurance premiums. 
B) A shareholder owning 2% or more of an S corporation's stock,who is also an employee of the corporation,must include all statutory fringe benefits in gross income on his/her individual return. 
C) Section 318 stock attribution rules are used to define 2% or more shareholders of S corporation's stock. 
D) All of the above are false.

Question 17

Cactus Corporation,an S Corporation,had accumulated earnings and profits of $100,000 at the beginning of 2018.Tex and Shirley each own 50% of the stock.Cactus does not make any distributions during 2018,but had $200,000 of ordinary income.In 2019,ordinary income was $100,000 and distributions were $100,000.What is Tex's ordinary income for 2019?

Accepted Answer

A) $0 
B) $50,000 
C) $100,000 
D) $200,000 
A) $0 
B) $50,000 
C) $100,000 
D) $200,000

Question 18

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

Accepted Answer

A) stock options 
B) qualified retirement plans 
C) group term life insurance premiums 
D) nonqualified deferred compensation 
A) stock options 
B) qualified retirement plans 
C) group term life insurance premiums 
D) nonqualified deferred compensation

Question 19

Mary,a U.S.citizen,owned 25% of the stock of Floran Corporation,an electing S corporation.At the time of her death,the Floran stock may go to all the following without affecting the S election except

Accepted Answer

A) her estate. 
B) a testamentary trust. 
C) a small business trust. 
D) a charitable remainder unitrust. 
A) her estate. 
B) a testamentary trust. 
C) a small business trust. 
D) a charitable remainder unitrust.

Question 20

Mashburn Corporation is an S corporation that uses a fiscal year ending June 30 as its tax year.When is Mashburn Corporation's income tax return due?

Accepted Answer

A) July 15 
B) September 15 
C) October 15 
D) March 15 of the next year 
A) July 15 
B) September 15 
C) October 15 
D) March 15 of the next year

Exam 11: S Corporations

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

What is a permitted year?

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.

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is false.

Identify which of the following statements is false.

Which of the following corporate tax levies are imposed on an S corporation?

Identify which of the following statements is true.

Which one of the following is not one of the corporation-related requirements for S corporation status?

Which of the following items is not separately stated for an S corporation?

Identify which of the following statements is true.

Identify which of the following statements is true.

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

Mary,a U.S.citizen,owned 25% of the stock of Floran Corporation,an electing S corporation.At the time of her death,the Floran stock may go to all the following without affecting the S election except

Mashburn Corporation is an S corporation that uses a fiscal year ending June 30 as its tax year.When is Mashburn Corporation's income tax return due?

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