Question 1

An estate may be a shareholder of an S corporation.

Accepted Answer

A) True 
 B)False  True

Question 2

Most IRAs cannot own stock in an S corporation.

Accepted Answer

A) True 
 B)False  True

Question 3

Liabilities affect the owner's basis differently in an S corporation than they do in a partnership.

Accepted Answer

A) True 
 B)False  True

Question 4

During 2015, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2014, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?

Accepted Answer

A)  Nutt recognizes a $1,000 LTCG. 
B)  Nutt's stock basis will be $2,000. 
C)  Nutt's ordinary income is $15,000. 
D)  Nutt's tax-free return of capital is $11,000. 
E)  None of the above. 
A)  Nutt recognizes a $1,000 LTCG. 
B)  Nutt's stock basis will be $2,000. 
C)  Nutt's ordinary income is $15,000. 
D)  Nutt's tax-free return of capital is $11,000. 
E)  None of the above.

Question 5

An S corporation that has total assets of at least $10 million on Schedule L at the end of the tax year must file a Schedule M-3.

Accepted Answer

A) True 
 B)False

Question 6

Which statement is incorrect with respect to the number-of-shareholders test in filing an S election?

Accepted Answer

A)  Husband Jaime and wife Maria count as one shareholder. 
B)  Grandmother Adela and granddaughter Maria count as one shareholder. 
C)  Husband Jaime and the estate of wife Maria count as one shareholder. 
D)  Husband Jaime and ex-wife Isabel count as one shareholder. 
E)  None of the above statements is incorrect. 
A)  Husband Jaime and wife Maria count as one shareholder. 
B)  Grandmother Adela and granddaughter Maria count as one shareholder. 
C)  Husband Jaime and the estate of wife Maria count as one shareholder. 
D)  Husband Jaime and ex-wife Isabel count as one shareholder. 
E)  None of the above statements is incorrect.

Question 7

Randall owns 800 shares in Fabrication, Inc., an S corporation in Moss Hill, Texas. In 2015, the basis in his stock is $30,000, before the adjustment for this year's losses. During 2015, Randall's share of the corporation's ordinary loss is $20,000, and his share of its capital loss is $15,000. How much can Randall deduct due to these losses?

Accepted Answer

A)  No deduction. 
B)  $15,000 ordinary loss; $10,000 capital loss. 
C)  $17,143 ordinary loss; $12,857 capital loss. 
D)  $20,000 ordinary loss; $15,000 capital loss. 
A)  No deduction. 
B)  $15,000 ordinary loss; $10,000 capital loss. 
C)  $17,143 ordinary loss; $12,857 capital loss. 
D)  $20,000 ordinary loss; $15,000 capital loss.

Question 8

An S corporation reports a recognized built-in gain of $110,000 and taxable income of $98,000. The company carries an $8,000 NOL carryforward from a C corporation year, and a $7,000 business credit carryforward from a C corporation year. The built-in gains tax liability is:

Accepted Answer

A)  $31,500. 
B)  $28,700. 
C)  $24,500. 
D)  $0. 
E)  Some other amount. 
A)  $31,500. 
B)  $28,700. 
C)  $24,500. 
D)  $0. 
E)  Some other amount.

Question 9

S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).

Accepted Answer

A) True 
 B)False

Question 10

S corporations are treated as partnerships under state property laws.

Accepted Answer

A) True 
 B)False

Question 11

You are a 60% owner of an S corporation. Calculate your ending stock basis, based upon these facts.

Accepted Answer

$52,600 + $15,000 +.

Question 12

Which tax provision does not apply to an S corporation?

Accepted Answer

A)  DPAD. 
B)  Section 1244 stock. 
C)  Penalty for failure to file. 
D)  10% charitable contribution limitation. 
E)  Estimated tax payments. 
A)  DPAD. 
B)  Section 1244 stock. 
C)  Penalty for failure to file. 
D)  10% charitable contribution limitation. 
E)  Estimated tax payments.

Question 13

If an S corporation's beginning balance in OAA is zero, and the following transactions occur, what is the ending OAA balance?   ​

Accepted Answer

A)  $1,300 
B)  $7,600 
C)  $23,300 
D)  $27,500 
E)  None of the above 
A)  $1,300 
B)  $7,600 
C)  $23,300 
D)  $27,500 
E)  None of the above

Question 14

An S corporation must possess which of the following characteristics?

Accepted Answer

A)  Not more than one hundred shareholders. 
B)  Corporation organized in the U.S. 
C)  Only one class of stock. 
D)  All of the above are required of an S corporation. 
E)  None of the above are required of an S corporation. 
A)  Not more than one hundred shareholders. 
B)  Corporation organized in the U.S. 
C)  Only one class of stock. 
D)  All of the above are required of an S corporation. 
E)  None of the above are required of an S corporation.

Question 15

Tax-exempt income at the corporate level flows through as exempt to S shareholders.

Accepted Answer

A) True 
 B)False

Question 16

On January 1, 2015, Kinney, Inc., an electing S corporation, holds $5,000 of AEP and $9,000 in AAA. Kinney has two shareholders, Eric and Maria, each of whom owns 500 shares of Kinney's stock. Kinney's 2015 taxable income is $6,000. Kinney distributes $6,000 to each shareholder on February 1, 2015, and distributes another $3,000 to each shareholder on September 1. How is Erin taxed on the distribution?

Accepted Answer

A)  $500 dividend income. 
B)  $1,000 dividend income. 
C)  $1,500 dividend income. 
D)  $3,000 dividend income. 
E)  None of the above. 
A)  $500 dividend income. 
B)  $1,000 dividend income. 
C)  $1,500 dividend income. 
D)  $3,000 dividend income. 
E)  None of the above.

Question 17

Samantha owned 1,000 shares in Evita, Inc., an S corporation, that uses the calendar year. On October 11, 2015, Samantha sells all of her Evita stock. Her basis at the beginning of 2015 was $60,000. Her share of the corporate income for 2015 was $22,000, and she receives a distribution of $35,000 between January 1 and October 11, 2015. Her stock basis at the time of the sale is:

Accepted Answer

A)  $117,000. 
B)  $82,000. 
C)  $60,000. 
D)  $47,000. 
A)  $117,000. 
B)  $82,000. 
C)  $60,000. 
D)  $47,000.

Question 18

Which, if any, of the following can be eligible shareholders of an S corporation?

Accepted Answer

A)  A Roth IRA. 
B)  Partnership. 
C)  A non-U.S. corporation. 
D)  A nonqualifying trust. 
E)  None of the above can own stock. 
A)  A Roth IRA. 
B)  Partnership. 
C)  A non-U.S. corporation. 
D)  A nonqualifying trust. 
E)  None of the above can own stock.

Question 19

An item that appears in the "Other Adjustments Account" affects stock basis, but not AAA, such as tax-exempt interest.

Accepted Answer

A) True 
 B)False

Question 20

Discuss two ways that an S election may be terminated.

Accepted Answer

Broadly, there are two ways of terminati

An estate may be a shareholder of an S corporation.

Most IRAs cannot own stock in an S corporation.

Liabilities affect the owner's basis differently in an S corporation than they do in a partnership.

During 2015, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2014, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?

An S corporation that has total assets of at least $10 million on Schedule L at the end of the tax year must file a Schedule M-3.

Which statement is incorrect with respect to the number-of-shareholders test in filing an S election?

An S corporation reports a recognized built-in gain of $110,000 and taxable income of $98,000. The company carries an $8,000 NOL carryforward from a C corporation year, and a $7,000 business credit carryforward from a C corporation year. The built-in gains tax liability is:

S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).

S corporations are treated as partnerships under state property laws.

You are a 60% owner of an S corporation. Calculate your ending stock basis, based upon these facts.

Which tax provision does not apply to an S corporation?

If an S corporation's beginning balance in OAA is zero, and the following transactions occur, what is the ending OAA balance?

An S corporation must possess which of the following characteristics?

Tax-exempt income at the corporate level flows through as exempt to S shareholders.

Which, if any, of the following can be eligible shareholders of an S corporation?

An item that appears in the "Other Adjustments Account" affects stock basis, but not AAA, such as tax-exempt interest.

Discuss two ways that an S election may be terminated.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 12: S Corporations

An estate may be a shareholder of an S corporation.

Most IRAs cannot own stock in an S corporation.

Liabilities affect the owner's basis differently in an S corporation than they do in a partnership.

During 2015, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2014, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?

An S corporation that has total assets of at least $10 million on Schedule L at the end of the tax year must file a Schedule M-3.

Which statement is incorrect with respect to the number-of-shareholders test in filing an S election?

An S corporation reports a recognized built-in gain of $110,000 and taxable income of $98,000. The company carries an $8,000 NOL carryforward from a C corporation year, and a $7,000 business credit carryforward from a C corporation year. The built-in gains tax liability is:

S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).

S corporations are treated as partnerships under state property laws.

You are a 60% owner of an S corporation. Calculate your ending stock basis, based upon these facts.

Which tax provision does not apply to an S corporation?

If an S corporation's beginning balance in OAA is zero, and the following transactions occur, what is the ending OAA balance? ​

An S corporation must possess which of the following characteristics?

Tax-exempt income at the corporate level flows through as exempt to S shareholders.

Which, if any, of the following can be eligible shareholders of an S corporation?

An item that appears in the "Other Adjustments Account" affects stock basis, but not AAA, such as tax-exempt interest.

Discuss two ways that an S election may be terminated.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

If an S corporation's beginning balance in OAA is zero, and the following transactions occur, what is the ending OAA balance?