Question 1

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 2

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

Accepted Answer

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

Question 3

Garret and Hans own all the stock of GH Corporation. Garret sells all his GH stock to Olga on February 12. The next day, GH makes an S election. For the election to apply to the current year, who must consent to the election?

Accepted Answer

Olga, Garret, and Hans must consent to the election. If Olga refuses to consent to the election, the election will not begin until next year.

Question 4

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 5

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

Question 6

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 7

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 8

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 9

Even if the termination of an S election is considered to be inadvertent, the election to terminate is irrevocable.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Identify which of the following statements is true.

Accepted Answer

A)  A regular corporation has common and preferred stock outstanding on January 1. On January 2, the preferred stock is canceled in a recapitalization, leaving only common stock outstanding. The corporation can make an S election for this tax year. 
B)  An S corporation should have a buy- sell agreement to guard itself against an ill- advised sale of its stock. 
C)  The terms "small business corporation" and "S corporation" are synonymous. 
D)  All of the above are false. 
A)  A regular corporation has common and preferred stock outstanding on January 1. On January 2, the preferred stock is canceled in a recapitalization, leaving only common stock outstanding. The corporation can make an S election for this tax year. 
B)  An S corporation should have a buy- sell agreement to guard itself against an ill- advised sale of its stock. 
C)  The terms "small business corporation" and "S corporation" are synonymous. 
D)  All of the above are false.

Question 12

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

Question 13

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 14

VJ Corporation is to be owned equally by Vic and Joe. The corporation will be formed by exchanging the assets and liabilities of the V & J Manufacturing Partnership for all the corporation's stock on September 1 of the current year. Both shareholders use the calendar year as their tax year and desire to make an S election. What tax issues should Vic and Joe consider with respect to the incorporation?

Accepted Answer

• Does the incorporation transaction qua

Question 15

Identify which of the following statements is true.

Accepted Answer

A)  A testamentary trust can be converted into a QSST trust. 
B)  A trust can own S corporation stock and have a C corporation as a beneficiary as long as the corporation is the sole beneficiary. 
C)  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. 
D)  All of the above are false. 
A)  A testamentary trust can be converted into a QSST trust. 
B)  A trust can own S corporation stock and have a C corporation as a beneficiary as long as the corporation is the sole beneficiary. 
C)  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. 
D)  All of the above are false.

Question 16

Davies Corporation is a calendar- year taxpayer that is owned equally by Vivian, Rob, Danny, and Doug Davies. At the close of business on May 31, Rob Davies sells his 25% stock interest to Paula Bryan. Which of the following statements about the S election is correct?

Accepted Answer

A)  Paula has 30 days to terminate the S election, otherwise the election remains in place for the entire year and all subsequent years. 
B)  Paula must consent to the S election, otherwise the election terminates at the close of business on May 31. 
C)  A new S election form must be filed by June 30 of the same year, with all shareholders consenting to the election. If a new S election is not filed, the election terminates on June 30 of that year. 
D)  None of the above statements are correct. 
A)  Paula has 30 days to terminate the S election, otherwise the election remains in place for the entire year and all subsequent years. 
B)  Paula must consent to the S election, otherwise the election terminates at the close of business on May 31. 
C)  A new S election form must be filed by June 30 of the same year, with all shareholders consenting to the election. If a new S election is not filed, the election terminates on June 30 of that year. 
D)  None of the above statements are correct.

Question 17

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 18

King Corporation, an electing S corporation, is 100% owned by Crystal. On January 1 of the current year, her adjusted basis in the King stock is $30,000. During the year, King reports an ordinary loss of $30,000,
tax- exempt municipal bond income of $15,000, dividend income from domestic corporations of $5,000, a long- term capital loss of $20,000, and a short- term capital loss of $30,000. What is Crystal's basis for the King stock at the end of the year?

Accepted Answer

@#IMG-DLM& Only $50,000 of the $80,000 t

Question 19

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 20

Identify which of the following statements is true.

Accepted Answer

A)  The S corporation's separately stated items are in general the same ones that apply in partnership taxation. 
B)  An election for an S corporation to use the Sec. 179 expensing election is made by the corporation and not by its shareholders. 
C)  An S corporation cannot claim a dividends- received deduction. 
D)  All of the above are true. 
A)  The S corporation's separately stated items are in general the same ones that apply in partnership taxation. 
B)  An election for an S corporation to use the Sec. 179 expensing election is made by the corporation and not by its shareholders. 
C)  An S corporation cannot claim a dividends- received deduction. 
D)  All of the above are 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.

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

Garret and Hans own all the stock of GH Corporation. Garret sells all his GH stock to Olga on February 12. The next day, GH makes an S election. For the election to apply to the current year, who must consent to the election?

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

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.

Even if the termination of an S election is considered to be inadvertent, the election to terminate is irrevocable.

Identify which of the following statements is true.

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 true.

Davies Corporation is a calendar- year taxpayer that is owned equally by Vivian, Rob, Danny, and Doug Davies. At the close of business on May 31, Rob Davies sells his 25% stock interest to Paula Bryan. Which of the following statements about the S election is correct?

Identify which of the following statements is true.

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

Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

Filters

Exam 11: S Corporations

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.

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

Garret and Hans own all the stock of GH Corporation. Garret sells all his GH stock to Olga on February 12. The next day, GH makes an S election. For the election to apply to the current year, who must consent to the election?

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

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.

Even if the termination of an S election is considered to be inadvertent, the election to terminate is irrevocable.

Identify which of the following statements is true.

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 true.

Davies Corporation is a calendar- year taxpayer that is owned equally by Vivian, Rob, Danny, and Doug Davies. At the close of business on May 31, Rob Davies sells his 25% stock interest to Paula Bryan. Which of the following statements about the S election is correct?

Identify which of the following statements is true.

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

Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

Filters