Exam 11: S Corporations

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.

Identify which of the following statements is true.

The Vanity Corporation organized and began operations in January. The corporation's ten equal shareholders elect to have Vanity taxed as an S corporation, and the election and necessary consents are filed in a timely manner. For its first tax year ended December 31, Vanity has ordinary income of $64,000 and short- term capital gains of $16,000. During the year, it distributes $30,000 in cash equally to its ten shareholders. For the year, how much income should each shareholder report and how should it be characterized?

Identify which of the following statements is false.

Identify which of the following statements is true.

Zinc Corporation is created in the current year and promptly makes an S election. How much passive income can it earn this year without fear of losing its S corporation status or being subject to the Sec. 1375 tax on excess net passive income?

Identify which of the following statements is true.

Which of the following tax levies imposed on an S corporation are required to be paid by using estimated tax payments?

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?

Identify which of the following statements is true.

All shareholders must consent to the revocation of S status.

Identify which of the following statements is true.

Caravan Corporation has always been an S corporation. Caravan Corporation is 100% owned by Alan Merten. On January 1, Alan has an adjusted basis of $50,000 in his Caravan stock. During the year, Caravan reports ordinary income of $60,000, a long- term capital gain of $10,000, and a charitable contribution of $5,000. Alan receives a $20,000 cash distribution from Caravan on December 1. What income does Alan recognize from the distribution, and what is his basis in the Caravan stock at year- end?

Power Corporation reports the following results: At the end of the year, Power's Subchapter C E&P is $50,000. What is Power Corporation's excess net passive inc and its excess net passive income tax for the year?

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

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.

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

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?

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