Question 1

Discuss the two methods of allocating tax-related items to S corporation shareholders.

Accepted Answer

​A per-day, per-share method must be use

Question 2

An S shareholder who dies during the S corporation tax year must report his or her share of the pro rata income (loss) items up to the date of death, on the final individual tax return.

Accepted Answer

A) True 
 B)False

Question 3

Advise your client how income, expenses, gain, and losses are allocated to shareholders of an S corporation.

Accepted Answer

In general, S corporation items are divi

Question 4

The choice of a flow-through entity for a closely-held corporation often is between a(n) ____________________ (a Federal tax entity) and a(n) ____________________ (a state tax entity).

Accepted Answer

S corporat

Question 5

Chris, the sole shareholder of Taylor, Inc., elects during 2016 to terminate the S election, effective January 1, 2017. As of the end of 2016, Taylor, Inc., holds AAA of $120,000 and OAA of $13,000. Chris receives a cash distribution of $130,000 on January 15, 2017. If his stock basis is $220,000 before the distribution, calculate Chris's taxable amount and his ending stock basis.

Accepted Answer

Cash distributions reduce the AAA ($120,

Question 6

There is no need formally to elect to treat ____________________ members as a single shareholder.

Accepted Answer

The answer of There is no need formally to elect...

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The maximum number of actual shareholders in an S corporation is:

Accepted Answer

A) 75. 
B) 100. 
C) 200. 
D) Some other number. 
E) Indeterminable. 
A) 75. 
B) 100. 
C) 200. 
D) Some other number. 
E) Indeterminable.

Question 9

An S corporation cannot be a shareholder in another corporation.

Accepted Answer

A) True 
 B)False

Question 10

An S shareholder's basis is decreased by distributions treated as being paid from AAA.

Accepted Answer

A) True 
 B)False

Question 11

An S corporation with substantial AEP records operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000. The passive income penalty tax payable, if any, is:

Accepted Answer

A) $0. 
B) $40,923. 
C) $116,923. 
D) $136,500. 
A) $0. 
B) $40,923. 
C) $116,923. 
D) $136,500.

Question 12

Pass-through S corporation losses can reduce the basis in the shareholder's loan to the entity, but distributions do not reduce loan basis.

Accepted Answer

A) True 
 B)False

Question 13

Which, if any, of the following items decreases an S corporation's AAA?

Accepted Answer

A) Section 1231 loss. 
B) Expenses related to tax-exempt income. 
C) Depletion in excess of basis. 
D) Distribution from earnings and profits. 
E) None of the above affects the AAA. 
A) Section 1231 loss. 
B) Expenses related to tax-exempt income. 
C) Depletion in excess of basis. 
D) Distribution from earnings and profits. 
E) None of the above affects the AAA.

Question 14

Mock Corporation converts to S corporation status in 2016. Mock used the LIFO inventory method in 2015 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 2015 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 15

Discuss two ways that an S election may be terminated.

Accepted Answer

Broadly, there are two ways of terminati

Question 16

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 17

The § 1202 exclusion of gain is not available on disposition of S corporation stock.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Identify a disadvantage of being an S corporation.

Accepted Answer

A) Estates can be shareholders. 
B) Losses flow through immediately to the shareholders. 
C) The AMT on corporations is avoided. 
D) Tax-exempt income flows through as excludible to shareholders. 
E) None of the above is a disadvantage of the S election. 
A) Estates can be shareholders. 
B) Losses flow through immediately to the shareholders. 
C) The AMT on corporations is avoided. 
D) Tax-exempt income flows through as excludible to shareholders. 
E) None of the above is a disadvantage of the S election.

Question 20

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

Accepted Answer

A) True 
 B)False

Discuss the two methods of allocating tax-related items to S corporation shareholders.

An S shareholder who dies during the S corporation tax year must report his or her share of the pro rata income (loss) items up to the date of death, on the final individual tax return.

Advise your client how income, expenses, gain, and losses are allocated to shareholders of an S corporation.

The choice of a flow-through entity for a closely-held corporation often is between a(n) (a Federal tax entity) and a(n) (a state tax entity).

There is no need formally to elect to treat ____________________ members as a single shareholder.

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

The maximum number of actual shareholders in an S corporation is:

An S corporation cannot be a shareholder in another corporation.

An S shareholder's basis is decreased by distributions treated as being paid from AAA.

An S corporation with substantial AEP records operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000. The passive income penalty tax payable, if any, is:

Pass-through S corporation losses can reduce the basis in the shareholder's loan to the entity, but distributions do not reduce loan basis.

Which, if any, of the following items decreases an S corporation's AAA?

Discuss two ways that an S election may be terminated.

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

The § 1202 exclusion of gain is not available on disposition of S corporation stock.

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

Identify a disadvantage of being an S corporation.

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

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

Multi-State Corporate Taxations

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 12: S Corporations

Discuss the two methods of allocating tax-related items to S corporation shareholders.

An S shareholder who dies during the S corporation tax year must report his or her share of the pro rata income (loss) items up to the date of death, on the final individual tax return.

Advise your client how income, expenses, gain, and losses are allocated to shareholders of an S corporation.

The choice of a flow-through entity for a closely-held corporation often is between a(n) ____________________ (a Federal tax entity) and a(n) ____________________ (a state tax entity).

There is no need formally to elect to treat ____________________ members as a single shareholder.

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

The maximum number of actual shareholders in an S corporation is:

An S corporation cannot be a shareholder in another corporation.

An S shareholder's basis is decreased by distributions treated as being paid from AAA.

An S corporation with substantial AEP records operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000. The passive income penalty tax payable, if any, is:

Pass-through S corporation losses can reduce the basis in the shareholder's loan to the entity, but distributions do not reduce loan basis.

Which, if any, of the following items decreases an S corporation's AAA?

Discuss two ways that an S election may be terminated.

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

The § 1202 exclusion of gain is not available on disposition of S corporation stock.

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

Identify a disadvantage of being an S corporation.

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

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

Multi-State Corporate Taxations

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

The choice of a flow-through entity for a closely-held corporation often is between a(n) (a Federal tax entity) and a(n) (a state tax entity).