Question 1

Which statement is correct with respect to filing an S election?

Accepted Answer

A) Form 2553 must be filed. 
B) All shareholders must consent. 
C) The election may be filed in the previous year. 
D) An extension of time is available for filing Form 2553. 
E) All of the above statements are correct. 
A) Form 2553 must be filed. 
B) All shareholders must consent. 
C) The election may be filed in the previous year. 
D) An extension of time is available for filing Form 2553. 
E) All of the above statements are correct.

Question 2

You are given the following facts about a 50% owner of an S corporation. Compute her ending stock basis. $$\begin{array} { l r } 
\text { Increase in AAA } & \$ 32,000 \
\text { Increase in } O A A & 6,300 \
\text { Payroll tax penalty } & 2,140 \
\text { Owner's beginning stock basis } & 39,800 \
\text { Tax-exempt interest income } & 4,800 \
\text { Insurance premiums paid (nondeductible) } & 2,700 \
\text { Owner's additional stock purchases } & 22,000
\end{array}$$ ?

Accepted Answer

A) $80,950 
B) $85,750 
C) $100,100 
D) $106,225 
E) Some other amount 
A) $80,950 
B) $85,750 
C) $100,100 
D) $106,225 
E) Some other amount

Question 3

Tax-exempt income at the S corporation level flows through as taxable to the shareholder.

Accepted Answer

A) True 
 B)False

Question 4

When an S corporation liquidates, which of its tax attributes disappear?

Accepted Answer

A) AAA. 
B) AEP. 
C) Suspended losses. 
D) All of the above items disappear. 
A) AAA. 
B) AEP. 
C) Suspended losses. 
D) All of the above items disappear.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Claude Bergeron sold 1,000 shares of Ditta, Inc., an S corporation, for $12,000. He had owned the stock for three years and had a stock basis of $111,000 in the shares. Claude is single, and he is the original owner of the § 1244 stock shares. Calculate the appropriate tax treatment.

Accepted Answer

A) No gain or loss. 
B) $50,000 LTCL; $49,000 ordinary deduction. 
C) $50,000 ordinary deduction; $49,000 LTCL. 
D) $99,000 long-term capital loss. 
A) No gain or loss. 
B) $50,000 LTCL; $49,000 ordinary deduction. 
C) $50,000 ordinary deduction; $49,000 LTCL. 
D) $99,000 long-term capital loss.

Question 7

Which of these tax provisions does not apply to an S corporation?

Accepted Answer

A) Section 1244 stock. 
B) "Partial liquidation" stock redemption. 
C) Tax-free "A" reorganization. 
D) Section 1202 capital gain exclusion. 
A) Section 1244 stock. 
B) "Partial liquidation" stock redemption. 
C) Tax-free "A" reorganization. 
D) Section 1202 capital gain exclusion.

Question 8

The termination of an S election occurs on the day after a corporation ceases to be a qualifying S corporation.

Accepted Answer

A) True 
 B)False

Question 9

Depreciation recapture income is a Schedule K item on the Form 1120S.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Pepper, Inc., an S corporation, holds a $1 million balance in accumulated E&P. It reports sales revenues of $400,000, taxable interest of $380,000, operating expenses of $250,000, and deductions attributable to the interest income of $140,000. What is Pepper's passive income penalty tax payable, if any?

Accepted Answer

A) $380,000. 
B) $185,000. 
C) $40,895. 
D) $0. 
E) Some other amount. 
A) $380,000. 
B) $185,000. 
C) $40,895. 
D) $0. 
E) Some other amount.

Question 12

Which item has no effect on an S corporation's AAA?

Accepted Answer

A) Stock purchase by a shareholder. 
B) Interest expense. 
C) Cost of goods sold. 
D) Capital loss. 
E) All of the above modify AAA. 
A) Stock purchase by a shareholder. 
B) Interest expense. 
C) Cost of goods sold. 
D) Capital loss. 
E) All of the above modify AAA.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

An S corporation's separately stated items generally are identical to those separately stated by _________________________.

Accepted Answer

The answer of An S corporation's separately stated items generally...

Question 15

An S shareholder's stock basis is reduced by flow-through losses before accounting for distributions.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

As with partnerships, the income, deductions, and tax credits of an S corporation ____________________ to the shareholders annually.

Accepted Answer

The answer of As with partnerships, the income, deductions, and...

Question 18

Most limited liability partnerships can own stock in an S corporation.

Accepted Answer

A) True 
 B)False

Question 19

An S corporation is limited to a theoretical maximum of ____________________ shareholders.

Accepted Answer

The answer of An S corporation is limited to a...

Question 20

What statement is correct with respect to an S corporation?

Accepted Answer

A) There are now more LLCs than S corporations. 
B) S corporation status allows shareholders immediately to realize tax benefits from corporate losses. 
C) An S corporation is prohibited from being a member of an affiliated group. 
D) An LLP may own stock in an S corporation. 
E) None of the above statements is correct. 
A) There are now more LLCs than S corporations. 
B) S corporation status allows shareholders immediately to realize tax benefits from corporate losses. 
C) An S corporation is prohibited from being a member of an affiliated group. 
D) An LLP may own stock in an S corporation. 
E) None of the above statements is correct.

Which statement is correct with respect to filing an S election?

Tax-exempt income at the S corporation level flows through as taxable to the shareholder.

When an S corporation liquidates, which of its tax attributes disappear?

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

Claude Bergeron sold 1,000 shares of Ditta, Inc., an S corporation, for $12,000. He had owned the stock for three years and had a stock basis of $111,000 in the shares. Claude is single, and he is the original owner of the § 1244 stock shares. Calculate the appropriate tax treatment.

Which of these tax provisions does not apply to an S corporation?

The termination of an S election occurs on the day after a corporation ceases to be a qualifying S corporation.

Depreciation recapture income is a Schedule K item on the Form 1120S.

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:

Which item has no effect on an S corporation's AAA?

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

An S corporation's separately stated items generally are identical to those separately stated by _________________________.

An S shareholder's stock basis is reduced by flow-through losses before accounting for distributions.

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

As with partnerships, the income, deductions, and tax credits of an S corporation ____________________ to the shareholders annually.

Most limited liability partnerships can own stock in an S corporation.

An S corporation is limited to a theoretical maximum of ____________________ shareholders.

What statement is correct with respect to an S corporation?

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

Which statement is correct with respect to filing an S election?

Tax-exempt income at the S corporation level flows through as taxable to the shareholder.

When an S corporation liquidates, which of its tax attributes disappear?

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

Claude Bergeron sold 1,000 shares of Ditta, Inc., an S corporation, for $12,000. He had owned the stock for three years and had a stock basis of $111,000 in the shares. Claude is single, and he is the original owner of the § 1244 stock shares. Calculate the appropriate tax treatment.

Which of these tax provisions does not apply to an S corporation?

The termination of an S election occurs on the day after a corporation ceases to be a qualifying S corporation.

Depreciation recapture income is a Schedule K item on the Form 1120S.

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:

Which item has no effect on an S corporation's AAA?

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

An S corporation's separately stated items generally are identical to those separately stated by _________________________.

An S shareholder's stock basis is reduced by flow-through losses before accounting for distributions.

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

As with partnerships, the income, deductions, and tax credits of an S corporation ____________________ to the shareholders annually.

Most limited liability partnerships can own stock in an S corporation.

An S corporation is limited to a theoretical maximum of ____________________ shareholders.

What statement is correct with respect to an S corporation?

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