Exam 12: S Corporations

You are given the following facts about a 50% owner of an S corporation. Compute her ending stock basis. Increase in AAA \ 32,000 Increase in OAA 6,300 Payroll tax penalty 2,140 Owner's beginning stock basis 39,800 Tax-exempt interest income 4,800 Insurance premiums paid (nondeductible) 2,700 Owner's additional stock purchases 22,000 Owner's 20\% QBI deduction 21,000

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

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

An S corporation cannot incur a tax liability at the corporation level.

Distributions of appreciated property by an S corporation are not taxable to the entity.

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

An S corporation is limited to a theoretical maximum of_______ shareholders.

A distribution from the other adjustment account OAA) is not taxable to an S shareholder.

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

During the year, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. At the end of last year, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?

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

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.

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2?

Oxen Corporation incurs the following transactions. Net income from operations \ 100,000 Interest income from savings account 3,000 Long-term capital gain from sale of securities 10,000 Short-term capital loss from sale of securities 4,000 Oxen maintains a valid S election and does not distribute any assets cash or property) to its sole shareholder, Megan. As a result, Megan must recognize ignore 20% QBI deduction):

You are given the following facts about a 40% owner of an S corporation. Calculate her ending stock basis. Owner's beginning stock basis \ 36,800 Increase in AAA 32,000 Increase in OAA 6,300 Payroll tax penalty 2,140 Tax-exempt interest income 4,800 Life insurance premiums paid 2,700 (nondeductible) Owner's purchases of additional stock 22,000

Towne, Inc., a calendar year S corporation, holds AAA of $627,050 at the beginning of the tax year. During the year, the following items occur. Sales income \ 216,000 Loss from real estate operations (4,000) Officers' life insurance proceeds 100,000 Premiums paid for officers' life insurance (3,600) Dividend income 17,000 Interest income 3,000 Charitable contributions (22,000) \S179 depreciation expense (2,500) Administrative expenses (35,000) Cash distributions to shareholders (73,220) Calculate Towne's ending AAA balance.

A service-type S corporation shareholder cannot claim the 20% QBI deduction.

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

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.

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.