Question 1

An S corporation is permitted to claim

Accepted Answer

A)  a personal exemption. 
B)  a deduction based on the amortization of organizational expenditures. 
C)  a net operating loss. 
D)  the dividends- received deduction. 
A)  a personal exemption. 
B)  a deduction based on the amortization of organizational expenditures. 
C)  a net operating loss. 
D)  the dividends- received deduction.

Question 2

Martha, a U.S. citizen, owns 40% of the stock of George Corporation, an electing S corporation. At the time of her death this year, the George stock passes to her estate. The stock is subsequently transferred to a trust provided for in Martha's will. Can the testamentary trust hold the George stock for a two- year period before the S election is terminated?

Accepted Answer

The trust can hold the S corporation sto

Question 3

The election of Subchapter S status by a corporation is valid only if all shareholders consent to the election.

Accepted Answer

A) True 
 B)False

Question 4

Identify which of the following statements is true.

Accepted Answer

A)  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. 
B)  An S corporation may be subject to the corporate alternative minimum tax. 
C)  Allocation of tax preference items for AMT generally occurs on a daily basis. 
D)  All of the above are false. 
A)  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. 
B)  An S corporation may be subject to the corporate alternative minimum tax. 
C)  Allocation of tax preference items for AMT generally occurs on a daily basis. 
D)  All of the above are false.

Question 5

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

Accepted Answer

A)  A C corporation can own stock of an S corporation. 
B)  A tax- exempt charity can own stock of an S corporation. 
C)  An S corporation can own stock of a C corporation. 
D)  An S corporation can own stock of a Qualified Subchapter S Subsidiary. 
A)  A C corporation can own stock of an S corporation. 
B)  A tax- exempt charity can own stock of an S corporation. 
C)  An S corporation can own stock of a C corporation. 
D)  An S corporation can own stock of a Qualified Subchapter S Subsidiary.

Question 6

Which one of the following special loss limitations applies to an S corporation?

Accepted Answer

A)  passive activity limitation rules 
B)  hobby loss rules 
C)  at- risk rules 
D)  All of the above apply. 
A)  passive activity limitation rules 
B)  hobby loss rules 
C)  at- risk rules 
D)  All of the above apply.

Question 7

Identify which of the following statements is true.

Accepted Answer

A)  An S corporation cannot own 100% of the stock of another S corporation. 
B)  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. 
C)  An S corporation cannot own any stock of another corporation. 
D)  All of the above are true. 
A)  An S corporation cannot own 100% of the stock of another S corporation. 
B)  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. 
C)  An S corporation cannot own any stock of another corporation. 
D)  All of the above are true.

Question 8

Identify which of the following statements is true.

Accepted Answer

A)  The built- in gains tax applicable to S corporations can be avoided if the property is held for ten years. 
B)  An S corporation generally will not owe the built- in gains tax if the corporation has never been a C corporation. 
C)  Beach Corporation, an S corporation, has gross receipts of $240,000; taxable income of $120,000; passive investment income of $100,000; and expenses directly attributable to the passive investment income of $20,000. The corporation's excess net passive income is $32,000. 
D)  All of the above are true. 
A)  The built- in gains tax applicable to S corporations can be avoided if the property is held for ten years. 
B)  An S corporation generally will not owe the built- in gains tax if the corporation has never been a C corporation. 
C)  Beach Corporation, an S corporation, has gross receipts of $240,000; taxable income of $120,000; passive investment income of $100,000; and expenses directly attributable to the passive investment income of $20,000. The corporation's excess net passive income is $32,000. 
D)  All of the above are true.

Question 9

Troy owns 50% of Dot.Com, an e- commerce company. His S corporation stock basis at the beginning of the year is $300,000. Dot.Com has not done well this year and will report an ordinary loss of $875,000. Troy's marginal tax rate for the current year is 35%. What tax issues should Troy consider with respect to the loss?

Accepted Answer

What is Troy's allocable share of the Do

Question 10

Train Corporation is an S corporation that is owned equally by Carlos and Diane at the beginning of the year. On April 21 (the 111th day of Train's tax year) of the current year, Carlos sells all of his Train Corporation stock to Andre. How many days will be used when computing Carlos's share of S corporation income for this year (a non- leap year), assuming that a special income allocation election is not made?

Accepted Answer

A)  110 
B)  111 
C)  255 
D)  254 
A)  110 
B)  111 
C)  255 
D)  254

Question 11

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

Question 12

Woods Corporation has operated as a C corporation for the last seven years. The corporation has assets with a
$500,000 adjusted basis and a $700,000 FMV. Liabilities are $200,000. Wolf Woods, a calendar- year taxpayer, owns all of the Woods Corporation stock. The corporation has a June 30 year- end and uses the accrual method of accounting. In order to reduce his total combined corporate and personal federal income tax liability, Wolf's CPA has told him to convert the corporation to S corporation status. Wolf would like to complete the conversion on the last day of the corporation's tax year. What tax issues should Wolf and his CPA consider with respect to the S election?

Accepted Answer

The questions listed below are based on

Question 13

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

Question 14

Identify which of the following statements is true.

Accepted Answer

A)  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. 
B)  Section 318 stock attribution rules are used to define 2% or more shareholders of S corporation's stock. 
C)  Fringe benefits limited by the more- than- 2%- shareholder rule include stock options, group term life insurance premiums, and medical insurance premiums. 
D)  All of the above are false. 
A)  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. 
B)  Section 318 stock attribution rules are used to define 2% or more shareholders of S corporation's stock. 
C)  Fringe benefits limited by the more- than- 2%- shareholder rule include stock options, group term life insurance premiums, and medical insurance premiums. 
D)  All of the above are false.

Question 15

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

Accepted Answer

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

Question 16

Cactus Corporation, an S corporation, had accumulated earnings and profits of $100,000 at the beginning of 2009. Tex and Shirley each own 50% of the stock and have a basis in their stock of $50,000 on January 1, 2009. Cactus does not make any distributions during 2009, but had $200,000 of ordinary income. In 2010, ordinary income was $100,000 and distributions were $100,000. What is Tex's basis at January 1, 2011?

Accepted Answer

A)  $100,000 
B)  $150,000 
C)  $250,000 
D)  $200,000 
A)  $100,000 
B)  $150,000 
C)  $250,000 
D)  $200,000

Question 17

Identify which of the following statements is false.

Accepted Answer

A)  A shareholder's ratable share of the S corporation's ordinary loss reduces the adjusted basis of his/her S corporation stock. Once the basis of the stock is reduced to zero, any loss- passthrough that remains reduces the basis of S corporation debts that are owed to the shareholder. 
B)  Randy is a shareholder in an S corporation. His stock basis is $10,000 and his basis in a loan he made to the corporation is $3,000. Randy's share of the corporation's ordinary loss for the current year is $11,000. Ignoring the at- risk and passive activity limitations, Randy can deduct the loss in full. 
C)  A shareholder's S corporation stock basis will increase when the shareholder acts as guarantor on a corporate indebtedness. 
D)  Debt basis is restored before stock basis. 
A)  A shareholder's ratable share of the S corporation's ordinary loss reduces the adjusted basis of his/her S corporation stock. Once the basis of the stock is reduced to zero, any loss- passthrough that remains reduces the basis of S corporation debts that are owed to the shareholder. 
B)  Randy is a shareholder in an S corporation. His stock basis is $10,000 and his basis in a loan he made to the corporation is $3,000. Randy's share of the corporation's ordinary loss for the current year is $11,000. Ignoring the at- risk and passive activity limitations, Randy can deduct the loss in full. 
C)  A shareholder's S corporation stock basis will increase when the shareholder acts as guarantor on a corporate indebtedness. 
D)  Debt basis is restored before stock basis.

Question 18

Identify which of the following statements is false.

Accepted Answer

A)  An S corporation that owes the built- in gains tax or the excess net passive income tax must make quarterly estimated tax payments. 
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 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. 
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 that owes the built- in gains tax or the excess net passive income tax must make quarterly estimated tax payments. 
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 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. 
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 19

David owns 25% of an S corporation's stock (a capital asset) for the first three months of the S corporation's tax year. During the year, the S corporation has $16,000 of ordinary income and $32,000 of long- term capital gain. David starts the year with a basis of $50,000 in his S corporation stock and sells the stock for $56,000 on April 1 of the year. Assuming all months have 30 days, how much gain/loss does David report on the sale of the stock and what is its character?

Accepted Answer

[$50,000 + ($16,000

Question 20

If losses are suspended due to the lack of basis in S corporation stock, do the losses expire when the S election terminates?

Accepted Answer

No. These loss carryovers may

An S corporation is permitted to claim

The election of Subchapter S status by a corporation is valid only if all shareholders consent to the election.

Identify which of the following statements is true.

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

Which one of the following special loss limitations applies to an S corporation?

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is true.

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.

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

Identify which of the following statements is false.

Identify which of the following statements is false.

If losses are suspended due to the lack of basis in S corporation stock, do the losses expire when the S election terminates?

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

Filters

Exam 11: S Corporations

An S corporation is permitted to claim

The election of Subchapter S status by a corporation is valid only if all shareholders consent to the election.

Identify which of the following statements is true.

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

Which one of the following special loss limitations applies to an S corporation?

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is true.

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.

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

Identify which of the following statements is false.

Identify which of the following statements is false.

If losses are suspended due to the lack of basis in S corporation stock, do the losses expire when the S election terminates?

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

Filters