Question 1

An S shareholder's basis is decreased by distributions treated as being paid from AAA.

Accepted Answer

A) True 
 B)False

Question 2

Which item is not included in an S corporation's nonseparately computed income?

Accepted Answer

A)  Net sales. 
B)  Cost of goods sold. 
C)  Dividends received. 
D)  Depreciation recapture. 
E)  All of these are included in non-separately computed income. 
A)  Net sales. 
B)  Cost of goods sold. 
C)  Dividends received. 
D)  Depreciation recapture. 
E)  All of these are included in non-separately computed income.

Question 3

Samantha owned 1,000 shares in Evita, Inc., an S corporation, that uses the calendar year. On October 11, Samantha sells all of her Evita stock. Her stock basis at the beginning of the tax year was $60,000. Evita's ordinary income for the year was $22,000 through the date of sale, and Samantha receives a distribution of $35,000 on May 3rd. Her stock basis at the time of the sale is:

Accepted Answer

A)  $117,000. 
B)  $82,000. 
C)  $60,000. 
D)  $47,000. 
A)  $117,000. 
B)  $82,000. 
C)  $60,000. 
D)  $47,000.

Question 4

You are a 60% owner of an S corporation. Calculate your ending stock basis based upon these facts. $\begin{array}{lr}
\text { Beginning stock basis } & \$ 52,600 \
\text { Purchases of additional stock } & 15,000 \
\text { Insurance premiums paid (nondeductible) } & 3,600 \
\text { Tax-exempt interest income } & 5,230 \
\text { Payroll tax penalty } & 3,770 \
\text { Increase in AAA } & 22,400 \
\text { Increase in } O A A & 5,800
\end{array}$

Accepted Answer

$84,520 [$52,600 + $

Question 5

The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

Accepted Answer

A) True 
 B)False

Question 6

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 7

If an S corporation's beginning balance in OAA is zero and the following transactions occur, what is the ending OAA balance? $$\begin{array} { l r } 
\text { Depreciation recapture income } & \$ 21,000 \
\text { Payroll tax penalty } & 4,200 \
\text { Tax-exempt interest income } & 5,300 \
\text { Nontaxable life insurance proceeds } & 5,100 \
\text { Life insurance premiums paid (nondeductible) } & 2,800
\end{array}$$

Accepted Answer

A)  $1,300 
B)  $7,600 
C)  $23,300 
D)  $27,500 
E)  None of these 
A)  $1,300 
B)  $7,600 
C)  $23,300 
D)  $27,500 
E)  None of these

Question 8

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 an):

Accepted Answer

A)  $2,000 LTCG. 
B)  $8,000 LTCG. 
C)  Stock basis of $2,000. 
D)  Loan basis of $10,000. 
A)  $2,000 LTCG. 
B)  $8,000 LTCG. 
C)  Stock basis of $2,000. 
D)  Loan basis of $10,000.

Question 9

On January 2, 2019, David loans his S corporation $10,000. By the end of 2019 David'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 to David of $11,000. David reports an):

Accepted Answer

A)  $1,000 LTCG. 
B)  $3,000 LTCG. 
C)  $11,000 LTCG. 
D)  Loan basis of $10,000. 
A)  $1,000 LTCG. 
B)  $3,000 LTCG. 
C)  $11,000 LTCG. 
D)  Loan basis of $10,000.

Question 10

Which of the following reduces a shareholder's S corporation stock basis?

Accepted Answer

A)  Depletion deductions in excess of the basis of property. 
B)  Illegal kickbacks paid. 
C)  Nontaxable income. 
D)  Sales income. 
E)  A 20% QBI deduction. 
A)  Depletion deductions in excess of the basis of property. 
B)  Illegal kickbacks paid. 
C)  Nontaxable income. 
D)  Sales income. 
E)  A 20% QBI deduction.

Question 11

Nonseparately computed loss_______ increases, reduces) a S shareholder's stock basis.

Accepted Answer

The answer of Nonseparately computed loss_______ increases, reduces) a S...

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

A capital loss allocated to a shareholder always reduces the Other Adjustments Account.

Accepted Answer

A) True 
 B)False

Question 17

An S corporation must possess which of the following characteristics?

Accepted Answer

A)  Not more than 100 shareholders. 
B)  Corporation organized in the United States. 
C)  Only one class of stock. 
D)  All of these. 
E)  None of these. 
A)  Not more than 100 shareholders. 
B)  Corporation organized in the United States. 
C)  Only one class of stock. 
D)  All of these. 
E)  None of these.

Question 18

The exclusion of gain on disposition of small business stock is not available on disposition of S corporation stock.

Accepted Answer

A) True 
 B)False

Question 19

Which corporation is eligible to make the S election?

Accepted Answer

A)  Non-U.S. corporation. 
B)  One-person limited liability company. 
C)  Insurance company. 
D)  U.S. bank. 
E)  None of these. 
A)  Non-U.S. corporation. 
B)  One-person limited liability company. 
C)  Insurance company. 
D)  U.S. bank. 
E)  None of these.

Question 20

Kinney, Inc., an electing S corporation, holds $5,000 of AEP and $9,000 in AAA at the beginning of the calendar tax year. Kinney has two shareholders, Eric and Maria, each of whom owns 500 shares of Kinney's stock. Kinney's taxable income is $6,000 for the year. Kinney distributes $6,000 to each shareholder on February 1, and it distributes another $3,000 to each shareholder on September 1. How is Eric taxed on the distribution?

Accepted Answer

A)  $500 dividend income. 
B)  $1,000 dividend income. 
C)  $1,500 dividend income. 
D)  $3,000 dividend income. 
A)  $500 dividend income. 
B)  $1,000 dividend income. 
C)  $1,500 dividend income. 
D)  $3,000 dividend income.

An S shareholder's basis is decreased by distributions treated as being paid from AAA.

Which item is not included in an S corporation's nonseparately computed income?

The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

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

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 an):

On January 2, 2019, David loans his S corporation $10,000. By the end of 2019 David'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 to David of $11,000. David reports an):

Which of the following reduces a shareholder's S corporation stock basis?

Nonseparately computed loss_______ increases, reduces) a S shareholder's stock basis.

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

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.

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

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

A capital loss allocated to a shareholder always reduces the Other Adjustments Account.

An S corporation must possess which of the following characteristics?

The exclusion of gain on disposition of small business stock is not available on disposition of S corporation stock.

Which corporation is eligible to make the S election?

Understanding and Working With the Federal Tax Law

The Deduction for Qualified Business Income for Pass-Through Entities

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operations, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 12: S Corporations

An S shareholder's basis is decreased by distributions treated as being paid from AAA.

Which item is not included in an S corporation's nonseparately computed income?

The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

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

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 an):

On January 2, 2019, David loans his S corporation $10,000. By the end of 2019 David'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 to David of $11,000. David reports an):

Which of the following reduces a shareholder's S corporation stock basis?

Nonseparately computed loss_______ increases, reduces) a S shareholder's stock basis.

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

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.

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

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

A capital loss allocated to a shareholder always reduces the Other Adjustments Account.

An S corporation must possess which of the following characteristics?

The exclusion of gain on disposition of small business stock is not available on disposition of S corporation stock.

Which corporation is eligible to make the S election?

Understanding and Working With the Federal Tax Law

The Deduction for Qualified Business Income for Pass-Through Entities

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operations, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters