Question 1

An S shareholder's stock basis does not include a ratable share of S corporation 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. 
A)  $-0-. 
B)  $10,000. 
C)  $80,000. 
D)  $100,000.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Lent Corporation converts to S corporation status in 2019. Lent had been using the LIFO inventory method and held a LIFO inventory value of $510,000 (FIFO value of $650,000). How much tax must be added to the C corporation tax liability for the year before the S election in 2020?

Accepted Answer

A)  $-0-. 
B)  $7,350. 
C)  $29,400. 
D)  $140,000. 
A)  $-0-. 
B)  $7,350. 
C)  $29,400. 
D)  $140,000.

Question 5

Explain the OAA concept.

Accepted Answer

S corporations report changes in the AAA

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Bidden, Inc., a calendar year S corporation, incurred the following items. $$\begin{array} { l c } 
\text { Sales } & \$ 130,000 \
\text { Depreciation recapture income } & 12,000 \
\text { Short-term capital gain } & 30,000 \
\text { Cost of goods sold } & ( 42,000 ) \
\text { Municipal bond interest income } & 7,000 \
\text { Administrative expenses } & ( 15,000 ) \
\text { Depreciation expense } & ( 17,000 ) \
\text { Charitable contributions } & ( 14,000 )
\end{array}$$ Calculate Bidden's nonseparately computed income.

Accepted Answer

The answer of Bidden, Inc., a calendar year S corporation,...

Question 8

A calendar year C corporation reports a $41,000 NOL in 2019, but it elects S status for 2020 and generates an NOL of $30,000 in that year. At all times during 2020, the stock of the corporation was owned by the same 10 shareholders, each of whom owned 10% of the stock. Kris, one of the 10 shareholders, holds an S stock basis of $2,300 at the beginning of 2020. How much of the 2020 loss, if any, can she deduct?

Accepted Answer

A)  $-0- 
B)  $2,300 
C)  $3,000 
D)  $7,100 
A)  $-0- 
B)  $2,300 
C)  $3,000 
D)  $7,100

Question 9

If a resident alien shareholder moves outside the United States, the S election is terminated.

Accepted Answer

A) True 
 B)False

Question 10

Persons who were S shareholders during any part of the year before the election date but were not shareholders when the election was made also must consent to an S election.

Accepted Answer

A) True 
 B)False

Question 11

When loss assets are distributed by an S corporation, a shareholder's basis is equal to the asset's fair market value.

Accepted Answer

A) True 
 B)False

Question 12

Any distribution of cash or property by a corporation that does not exceed the balance of AAA with respect to S stock during a post-termination transition period of approximately one year is applied against and reduces the basis of the S stock.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The exclusion of on the disposition of small business stock (is/is not)
available for S stock.

Accepted Answer

The answer of The exclusion of on the disposition of...

Question 15

An S corporation's AAA can have a negative balance.

Accepted Answer

A) True 
 B)False

Question 16

A corporation can revoke its S election as of a future date.

Accepted Answer

A) True 
 B)False

Question 17

Since loss property receives a in basis without any loss recognition, S corporation distributions of loss property generally should be .

Accepted Answer

The answer of Since loss property receives a in basis...

Question 18

A per-day, per-share allocation of flow-through S corporation items must be used.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 22: S Corporations

An S shareholder's stock basis does not include a ratable share of S corporation 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:

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

Lent Corporation converts to S corporation status in 2019. Lent had been using the LIFO inventory method and held a LIFO inventory value of $510,000 (FIFO value of $650,000). How much tax must be added to the C corporation tax liability for the year before the S election in 2020?

Explain the OAA concept.

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

If a resident alien shareholder moves outside the United States, the S election is terminated.

Persons who were S shareholders during any part of the year before the election date but were not shareholders when the election was made also must consent to an S election.

When loss assets are distributed by an S corporation, a shareholder's basis is equal to the asset's fair market value.

Any distribution of cash or property by a corporation that does not exceed the balance of AAA with respect to S stock during a post-termination transition period of approximately one year is applied against and reduces the basis of the S stock.

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

The exclusion of on the disposition of small business stock (is/is not) available for S stock.

An S corporation's AAA can have a negative balance.

A corporation can revoke its S election as of a future date.

Since loss property receives a in basis without any loss recognition, S corporation distributions of loss property generally should be .

A per-day, per-share allocation of flow-through S corporation items must be used.

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

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

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

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