Question 1

Identify which of the following statements is true.

Accepted Answer

A) All of the shareholders of an S corporation must consent to a revocation of the S election. 
B) A revocation of an S corporation election can be retrospective to any date. 
C) An S election will not be terminated due to excess passive income if the corporation does not have Subchapter C E&P. 
D) All of the above are true. 
A) All of the shareholders of an S corporation must consent to a revocation of the S election. 
B) A revocation of an S corporation election can be retrospective to any date. 
C) An S election will not be terminated due to excess passive income if the corporation does not have Subchapter C E&P. 
D) All of the above are true.

Question 2

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

Accepted Answer

A) charitable remainder unitrusts. 
B) QSSTs. 
C) grantor trusts. 
D) testamentary trusts. 
A) charitable remainder unitrusts. 
B) QSSTs. 
C) grantor trusts. 
D) testamentary trusts.

Question 3

Identify which of the following statements is true.

Accepted Answer

A) An S corporation may be subject to the corporate alternative minimum tax. 
B) Allocation of tax preference items for AMT generally occurs on a daily basis. 
C) An S corporation may be subject to the corporate alternative minimum tax when the corporation has accumulated E&P from prior C corporation tax years. 
D) All of the above are false. 
A) An S corporation may be subject to the corporate alternative minimum tax. 
B) Allocation of tax preference items for AMT generally occurs on a daily basis. 
C) An S corporation may be subject to the corporate alternative minimum tax when the corporation has accumulated E&P from prior C corporation tax years. 
D) All of the above are false.

Question 4

An S corporation reports ordinary income of $120,000 after deducting $20,000 for Fred's salary.Fred and his three children own the S corporation equally.The IRS determines Fred's stock transfer to his three children is not bona fide.Reasonable compensation for Fred is $40,000.How much of the S corporation's $140,000 pre-salary income must be reported by Fred?

Accepted Answer

A) $140,000 
B) $100,000 
C) $50,000 
D) $40,000 
A) $140,000 
B) $100,000 
C) $50,000 
D) $40,000

Question 5

King Corporation,a cash method taxpayer that uses the calendar year as its tax year,was incorporated on June 1,1984.The corporation made its initial S election on December 1 of last year,effective for the current tax year.Earnings and profits of $60,000 have been retained from C corporation tax years.Which one of the following events results in the recognition of a built-in gain?

Accepted Answer

A) collection of accounts receivable in the current year that resulted from services performed last year 
B) collection of interest income earned in the current year on bonds purchased on January 1 of last year 
C) collection of dividends declared on April 5 of the current year on stock purchased on February 14 of the current year 
D) None of the above are built-in gains. 
A) collection of accounts receivable in the current year that resulted from services performed last year 
B) collection of interest income earned in the current year on bonds purchased on January 1 of last year 
C) collection of dividends declared on April 5 of the current year on stock purchased on February 14 of the current year 
D) None of the above are built-in gains.

Question 6

The accumulated adjustments account is the cumulative total of ordinary income or loss and separately stated items (excluding tax-exempt income and expenses)for the most recent continuous period during which the corporation has been an S corporation.

Accepted Answer

A) True 
 B)False

Question 7

An S corporation is permitted an automatic extension of time for filing its tax return.The automatic extension period is

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.

Question 8

Up to six generations of a family are considered as one shareholder for purposes of the 100-shareholder limit.

Accepted Answer

A) True 
 B)False

Question 9

April Corporation's Subchapter S election was voluntarily terminated for 2015.The first year that April would be eligible to reelect S corporation status is

Accepted Answer

A) 2016. 
B) 2017. 
C) 2018. 
D) 2020. 
A) 2016. 
B) 2017. 
C) 2018. 
D) 2020.

Question 10

Identify which of the following statements is true.

Accepted Answer

A) An S corporation cannot own any stock of another corporation. 
B) An S corporation cannot own 100% of the stock of another S corporation. 
C) An S corporation that owns all of the stock of a Qualified Subchapter S Subsidiary (QSub)must report all the income,deductions,and losses of the subsidiary on its own tax return. 
D) All of the above are true. 
A) An S corporation cannot own any stock of another corporation. 
B) An S corporation cannot own 100% of the stock of another S corporation. 
C) An S corporation that owns all of the stock of a Qualified Subchapter S Subsidiary (QSub)must report all the income,deductions,and losses of the subsidiary on its own tax return. 
D) All of the above are true.

Question 11

Shanghai Corporation was organized and elected S status in the current year.How much passive investment income can Shanghai earn and retain its S status?

Accepted Answer

A) none 
B) 80% of gross receipts 
C) 50% of gross receipts 
D) no limit 
A) none 
B) 80% of gross receipts 
C) 50% of gross receipts 
D) no limit

Question 12

Tax-exempt interest earned by an S corporation is not reported to its shareholders because it is excluded from the shareholders' gross income.

Accepted Answer

A) True 
 B)False

Question 13

Corporations and partnerships can be S corporation shareholders.

Accepted Answer

A) True 
 B)False

Question 14

A C corporation was formed five years ago and is a fiscal-year taxpayer with a June 30 year-end.The C corporation wants to make an S election for its tax year beginning in the current year.The election must be made by ________ (assuming permission can be obtained to continue using the fiscal year from the IRS).

Accepted Answer

A) June 30 of the current year 
B) September 15 of the current year 
C) June 30 of the next year 
D) September 15 of the next year 
A) June 30 of the current year 
B) September 15 of the current year 
C) June 30 of the next year 
D) September 15 of the next year

Question 15

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.

Accepted Answer

A) True 
 B)False

Exam 11: S Corporations

Identify which of the following statements is true.

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

Identify which of the following statements is true.

The accumulated adjustments account is the cumulative total of ordinary income or loss and separately stated items (excluding tax-exempt income and expenses)for the most recent continuous period during which the corporation has been an S corporation.

An S corporation is permitted an automatic extension of time for filing its tax return.The automatic extension period is

Up to six generations of a family are considered as one shareholder for purposes of the 100-shareholder limit.

April Corporation's Subchapter S election was voluntarily terminated for 2015.The first year that April would be eligible to reelect S corporation status is

Identify which of the following statements is true.

Shanghai Corporation was organized and elected S status in the current year.How much passive investment income can Shanghai earn and retain its S status?

Tax-exempt interest earned by an S corporation is not reported to its shareholders because it is excluded from the shareholders' gross income.

Corporations and partnerships can be S corporation shareholders.

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.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

U.S. Taxation of Foreign-Related Transactions

an Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Business Expenses and Deferred Compensation

Itemized Deductions

Losses and Bad Debts

Depreciation,cost Recovery,amortization,and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods,tax Credits,and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

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