Exam 12: S Corporations

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

An S corporation does not recognize a loss when distributing assets that are worth less than their basis.

There are no advantages for an S corporation to issue § 1244 stock.

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

If the beginning balance in OAA is zero and the following transactions occur, what is the ending OAA balance? Depreciation recapture income \ 21,000 Payroll tax penalty 4,200 Tax-exempt interest 5,700 Nontaxable life insurance proceeds 3,900 Insurance premiums paid (nondeductible) 2,900 Charitable contributions 17,000

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

Some ____________________and_______ taxation rules apply to an S corporation.

What method is used to allocate S corporation income or losses unless an election to the contrary is made)?

Shareholders owning an)________ of shares voting and nonvoting) may____________________ revoke an S election.

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

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

The Section 179 expense deduction is a Schedule K item on the Form 1120S.

If an S corporation has C corporation E & P and passive investment income in excess of_________ % of its gross receipts for_______ consecutive taxable years, the S election is terminated at the beginning of the __________year.

The corporate-level tax on recognized built-in gains applies when an S corporation disposes of an asset in a taxable disposition within five years after the date on which the S election took effect.

Alomar, a cash basis S corporation in Orlando, FL, holds the following assets and liabilities on January 1, 2020, the date the S election is made. Adjusted Basis Fair Market Value Cash \ 200,000 \ 200,000 Accounts receivable -0- 105,000 Equipment 110,000 100,000 Land 1,800,000 2,500,000 Accounts payable -0- 110,000 During the year, Alomar collects the accounts receivable and pays the accounts payable. The land is sold for $3 million, and the taxable income for the year is $590,000. Calculate any built-in gains tax.

You are given the following facts about a solely owned S corporation. What is the shareholder's ending stock basis? Increase in AAA \ 31,000 Increase in OAA 6,300 Payroll tax penalty 2,140 Beginning stock basis 39,800 Stock purchases 22,000 Tax-exempt life insurance proceeds 4,800 Life insurance premiums paid 2,700 (nondeductible)

A newly formed S corporation does not receive any tax benefit from a C corporation's NOL incurred in its first election tax year.

Estella, Inc., a calendar year S corporation, incurred the following items during the tax year. Municipal bond interest \ 7,000 Sales 120,000 Depreciation recapture income 14,000 Long-term capital gain 20,000 Cost of goods sold (42,000) Administrative expenses (15,000) Depreciation expense (13,000) Charitable contributions (10,000) 20\% QBI deduction 4,370 Calculate Estella's nonseparately computed income.

An S corporation is subject to the following taxes).

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