Question 1

An S corporation shareholder's stock basis includes his or her direct investments plus a ratable share of any corporate liabilities.

Accepted Answer

A) True 
 B)False

Question 2

Fred is the sole shareholder of an S corporation in Fort Deposit, Alabama. At a time when his stock basis is $20,000, the corporation distributes appreciated property worth $100,000 (basis of $20,000). Fred's taxable gain is:

Accepted Answer

A)  $0. 
B)  $10,000. 
C)  $80,000. 
D)  $100,000. 
E)  None of the above. 
A)  $0. 
B)  $10,000. 
C)  $80,000. 
D)  $100,000. 
E)  None of the above.

Question 3

Four unrelated individuals acquire assets on behalf of Jump Corporation on May 21, 2015, purchased assets on June 5, 2015, and begin doing business on June 15, 2015. They subscribe to shares of stock, file articles of incorporation for Jump, and become shareholders on July 23, 2015. The S election must be filed no later than 2 1/2 months after:

Accepted Answer

A)  May 21, 2015. 
B)  June 5, 2015. 
C)  June 15, 2015. 
D)  July 23, 2015. 
E)  December 31, 2015. 
A)  May 21, 2015. 
B)  June 5, 2015. 
C)  June 15, 2015. 
D)  July 23, 2015. 
E)  December 31, 2015.

Question 4

A capital loss allocated to a shareholder always reduces the Other Adjustments Account.

Accepted Answer

A) True 
 B)False

Question 5

Grams, Inc., a calendar year S corporation is a manufacturer of widgets. Grams reports $20,000 DPGR and $15,000 of wages; its S corporation's QPAI is $5,000. Janet owns a 40% interest in the S corporation. All expenses that reduce DPGR are from wages, and all wages paid relate to DPGR. How much QPAI and wages are allocated to Janet?

Accepted Answer

A)  None. 
B)  $2,000 and $6,000. 
C)  $5,000 and $15,000. 
D)  $5,000 and $20,000. 
A)  None. 
B)  $2,000 and $6,000. 
C)  $5,000 and $15,000. 
D)  $5,000 and $20,000.

Question 6

If an S corporation shareholder's basis in a loan to the entity has been _________________, the shareholder recognizes gross income when the S corporation repays the shareholder.

Accepted Answer

The answer of If an S corporation shareholder's basis in...

Question 7

Any distribution made by an S corporation during a tax year is taken into account before accounting for the year's losses.

Accepted Answer

A) True 
 B)False

Question 8

Only 51% of the shareholders must consent to an S election.

Accepted Answer

A) True 
 B)False

Question 9

An S shareholder's basis is increased by stock purchases and capital contributions.

Accepted Answer

A) True 
 B)False

Question 10

Form 1120S provides an S shareholder's computation of his or her stock basis.

Accepted Answer

A) True 
 B)False

Question 11

Mock Corporation converts to S corporation status in 2015. Mock used the LIFO inventory method in 2014 and had a LIFO inventory of $435,000 (FIFO value of $550,000) on the date of the S election. How much tax must be added to Mock's 2014 corporate tax liability, assuming that Mock is subject to a 35% tax rate.

Accepted Answer

A)  $0 
B)  $10,062.50 
C)  $40,250 
D)  $115,000 
E)  Some other amount 
A)  $0 
B)  $10,062.50 
C)  $40,250 
D)  $115,000 
E)  Some other amount

Question 12

The Section 179 expense deduction is a Schedule K item on the Form 1120S.

Accepted Answer

A) True 
 B)False

Question 13

You are given the following facts about a solely owned S corporation. What is the shareholder's ending stock basis?   ​

Accepted Answer

A)  $61,800 
B)  $68,100 
C)  $99,100 
D)  $100,100 
E)  Some other amount 
A)  $61,800 
B)  $68,100 
C)  $99,100 
D)  $100,100 
E)  Some other amount

Question 14

A new S corporation shareholder can revoke the S election unilaterally, if he/she owns how much of the existing S corporation's stock?

Accepted Answer

A)  More than 50%. 
B)  50% or more. 
C)  The election can be revoked only if all of the shareholders consent. 
D)  The election cannot be revoked during the first year of the new shareholder's ownership. 
A)  More than 50%. 
B)  50% or more. 
C)  The election can be revoked only if all of the shareholders consent. 
D)  The election cannot be revoked during the first year of the new shareholder's ownership.

Question 15

On January 2, 2014, David loans his S corporation $10,000. By the end of 2014 David's stock basis is zero and the basis in his note has been reduced to $8,000. During 2015, the company's operating income is $10,000. The company makes 2015 distributions to David of $11,000. David reports a(n):

Accepted Answer

A)  $1,000 LTCG. 
B)  $3,000 LTCG. 
C)  $11,000 LTCG. 
D)  Loan basis of $10,000. 
A)  $1,000 LTCG. 
B)  $3,000 LTCG. 
C)  $11,000 LTCG. 
D)  Loan basis of $10,000.

Question 16

What method is used to allocate S corporation income or losses (unless an election to the contrary is made)?

Accepted Answer

A)  Any method agreed to by all of the shareholders. 
B)  Per-day allocation. 
C)  FIFO method. 
D)  LIFO method. 
E)  Some other method. 
A)  Any method agreed to by all of the shareholders. 
B)  Per-day allocation. 
C)  FIFO method. 
D)  LIFO method. 
E)  Some other method.

Question 17

An S election is made on the shareholder's Form 2553.

Accepted Answer

A) True 
 B)False

Question 18

An S corporation can claim a deduction for its NOL carryovers.

Accepted Answer

A) True 
 B)False

Question 19

Non-separately computed loss ____________________ a S shareholder's stock basis.

Accepted Answer

The answer of Non-separately computed loss ____________________ a S shareholder's...

Question 20

The LIFO recapture tax is a variation of the passive investment income penalty tax.

Accepted Answer

A) True 
 B)False

An S corporation shareholder's stock basis includes his or her direct investments plus a ratable share of any corporate liabilities.

Fred is the sole shareholder of an S corporation in Fort Deposit, Alabama. At a time when his stock basis is $20,000, the corporation distributes appreciated property worth $100,000 (basis of $20,000). Fred's taxable gain is:

A capital loss allocated to a shareholder always reduces the Other Adjustments Account.

If an S corporation shareholder's basis in a loan to the entity has been _________________, the shareholder recognizes gross income when the S corporation repays the shareholder.

Any distribution made by an S corporation during a tax year is taken into account before accounting for the year's losses.

Only 51% of the shareholders must consent to an S election.

An S shareholder's basis is increased by stock purchases and capital contributions.

Form 1120S provides an S shareholder's computation of his or her stock basis.

The Section 179 expense deduction is a Schedule K item on the Form 1120S.

You are given the following facts about a solely owned S corporation. What is the shareholder's ending stock basis?

A new S corporation shareholder can revoke the S election unilaterally, if he/she owns how much of the existing S corporation's stock?

On January 2, 2014, David loans his S corporation $10,000. By the end of 2014 David's stock basis is zero and the basis in his note has been reduced to $8,000. During 2015, the company's operating income is $10,000. The company makes 2015 distributions to David of $11,000. David reports a(n):

What method is used to allocate S corporation income or losses (unless an election to the contrary is made)?

An S election is made on the shareholder's Form 2553.

An S corporation can claim a deduction for its NOL carryovers.

Non-separately computed loss ____________________ a S shareholder's stock basis.

The LIFO recapture tax is a variation of the passive investment income penalty tax.

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 S corporation shareholder's stock basis includes his or her direct investments plus a ratable share of any corporate liabilities.

Fred is the sole shareholder of an S corporation in Fort Deposit, Alabama. At a time when his stock basis is $20,000, the corporation distributes appreciated property worth $100,000 (basis of $20,000). Fred's taxable gain is:

A capital loss allocated to a shareholder always reduces the Other Adjustments Account.

If an S corporation shareholder's basis in a loan to the entity has been _________________, the shareholder recognizes gross income when the S corporation repays the shareholder.

Any distribution made by an S corporation during a tax year is taken into account before accounting for the year's losses.

Only 51% of the shareholders must consent to an S election.

An S shareholder's basis is increased by stock purchases and capital contributions.

Form 1120S provides an S shareholder's computation of his or her stock basis.

The Section 179 expense deduction is a Schedule K item on the Form 1120S.

You are given the following facts about a solely owned S corporation. What is the shareholder's ending stock basis? ​

A new S corporation shareholder can revoke the S election unilaterally, if he/she owns how much of the existing S corporation's stock?

On January 2, 2014, David loans his S corporation $10,000. By the end of 2014 David's stock basis is zero and the basis in his note has been reduced to $8,000. During 2015, the company's operating income is $10,000. The company makes 2015 distributions to David of $11,000. David reports a(n):

What method is used to allocate S corporation income or losses (unless an election to the contrary is made)?

An S election is made on the shareholder's Form 2553.

An S corporation can claim a deduction for its NOL carryovers.

Non-separately computed loss ____________________ a S shareholder's stock basis.

The LIFO recapture tax is a variation of the passive investment income penalty tax.

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

You are given the following facts about a solely owned S corporation. What is the shareholder's ending stock basis?