Exam 11: S Corporations

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).

Identify which of the following statements is true.

An electing S corporation has a $30,000 ordinary loss for the nonleap 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 Beverly?

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

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

Dixon Corporation was incorporated on January 1, 2005. The corporation made its S election on April 1, 2008. The corporation retains an E&P balance from its C corporation days. Which one of the following current- year income and expense items is not included in Dixon Corporation's Accumulated Adjustments Account?

April Corporation's Subchapter S election was voluntarily terminated for 2010. The first year that April would be eligible to reelect S corporation status is

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?

Identify which of the following statements is false.

Which one of the following individuals or entities is ineligible to be an S corporation shareholder?

All shareholders must consent to the revocation of S status.

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?

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

If an S corporation inadvertently terminates its election, the IRS

Robert Elk paid $100,000 for all of the single class of stock of Elkom Corporation, an electing S corporation, when incorporated in January, 2007. Elkom's operating results and dividend distribution are as follows: Tax Year Ending Ordinary Income Distribution 2007 (\ 40,000) 2008 60,000 \ 20,000(9/30) 2009 30,000 What is Elk's basis for his Elkom stock on December 31 of 2007?

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?

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?

Alligood Corporation has two classes of common stock outstanding. The Class A and Class B common stock give the shareholders identical rights and interests in the profits and assets of the corporation. Class A stock has one vote per share. Class B stock is nonvoting. Alligood Corporation may

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?

List and discuss five advantages and five disadvantages of electing to be taxed as an S corporation over a C corporation or a partnership.