Lemon Corporation incurs the following transactions. $\begin{array}{lc} \text { Net income from operations } & \$ 110,000 \\ \text { Interest income from saving account } & 5,000 \\ \text { Long-term capital gain from sale of securities } & 9,000 \\ \text { Short-term capital loss from sale of securities } & 4,000 \end{array}$ Lemon maintains a valid S election and does not distribute any dividends to its shareholder, Patty. As a result, which of the following must Patty recognize? Ignore the 20% QBI deduction.

A) Ordinary income of $115,000 and long-term capital gain of $5,000. B) Ordinary income of $115,000, long-term capital gain of $9,000, and $4,000 short-term capital loss. C) Ordinary income of $120,000. D) Capital gain of $120,000. A) Ordinary income of $115,000 and long-term capital gain of $5,000. B) Ordinary income of $115,000, long-term capital gain of $9,000, and $4,000 short-term capital loss. C) Ordinary income of $120,000. D) Capital gain of $120,000.

Exam 22: S Corporations

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Donna and Mark are married and file a joint return reporting taxable income of $350,000. Donna owns a qualified S corporation that is not a specified service business. During the year, she incurs qualified business income of $75,000. Donna's share of wages paid by the business is $20,000. Assuming there is no qualified property factor, calculate her 20% QBI deduction.

(Multiple Choice)

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Question 61

A cash basis calendar year C corporation reports $100,000 of accounts receivable on the date of its conversion to S status on February 14. By the end of the year, $60,000 of these receivables have been collected. Calculate any built- in gains tax, assuming that there is sufficient taxable income.

(Multiple Choice)

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Question 62

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

(True/False)

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Question 63

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

(Multiple Choice)

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Question 64

Depreciation recapture income is a (separately, nonseparately) computed amount.

(Short Answer)

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Question 65

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

(Multiple Choice)

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Question 66

The final individual tax return of 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.

(True/False)

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Question 67

Pepper, Inc., an S corporation in Norfolk, VA, has revenues of $400,000, taxable interest of $380,000, operating expe of $250,000, and deductions attributable to the interest income of $140,000. Calculate any passive investment income penalty tax payable by this corporation.

(Essay)

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Question 68

Lemon Corporation incurs the following transactions. Net income from operations \ 110,000 Interest income from saving account 5,000 Long-term capital gain from sale of securities 9,000 Short-term capital loss from sale of securities 4,000 Lemon maintains a valid S election and does not distribute any dividends to its shareholder, Patty. As a result, which of the following must Patty recognize? Ignore the 20% QBI deduction.

(Multiple Choice)

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Question 69

Which statement is incorrect?

(Multiple Choice)

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Question 70

Compensation for services rendered to an S corporation generates a corporate-level FICA tax liability.

(True/False)

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Question 71

Discuss two ways that an S election may be terminated.

(Essay)

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Question 72

On January 2, 2019, Tim loans his S corporation $10,000. By the end of 2019, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000. During 2020, the company's operating income is $10,000. The company makes 2020 distributions of $8,000 to Tim. He reports a(n):

(Multiple Choice)

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Question 73

In the case of a complete termination of an S corporation interest, a tax year may occur.

(Short Answer)

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Question 74

An S corporation's LIFO recapture amount equals the excess of the inventory's value under over the value.

(Short Answer)

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Question 75

Stock basis first is increased by income items, then by distributions, and finally decreased by ____________________.

(Short Answer)

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Question 76

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

(True/False)

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Question 77

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

(True/False)

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Question 78

A one-person LLC can be a shareholder of an S corporation.

(True/False)

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Question 79

Which item does not appear on Schedule K of Form 1120S?

(Multiple Choice)

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Question 80

Showing 61 - 80 of 121

Exam 22: S Corporations

A cash basis calendar year C corporation reports $100,000 of accounts receivable on the date of its conversion to S status on February 14. By the end of the year, $60,000 of these receivables have been collected. Calculate any built- in gains tax, assuming that there is sufficient taxable income.

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

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

Depreciation recapture income is a (separately, nonseparately) computed amount.

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

The final individual tax return of 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.

Pepper, Inc., an S corporation in Norfolk, VA, has revenues of $400,000, taxable interest of $380,000, operating expe of $250,000, and deductions attributable to the interest income of $140,000. Calculate any passive investment income penalty tax payable by this corporation.

Which statement is incorrect?

Compensation for services rendered to an S corporation generates a corporate-level FICA tax liability.

Discuss two ways that an S election may be terminated.

On January 2, 2019, Tim loans his S corporation $10,000. By the end of 2019, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000. During 2020, the company's operating income is $10,000. The company makes 2020 distributions of $8,000 to Tim. He reports a(n):

In the case of a complete termination of an S corporation interest, a tax year may occur.

An S corporation's LIFO recapture amount equals the excess of the inventory's value under ____________________ over the ____________________ value.

Stock basis first is increased by income items, then by distributions, and finally decreased by ____________________.

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

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

A one-person LLC can be a shareholder of an S corporation.

Which item does not appear on Schedule K of Form 1120S?

Understanding and Working With the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

An S corporation's LIFO recapture amount equals the excess of the inventory's value under over the value.