Question 1

Which of the following statements is correct regarding S corporation estimated taxes?

Accepted Answer

A)  S corporations never pay estimated taxes. 
B)  S corporations with a federal income tax liability of $500 due to the built-in gains tax or excess net passive income tax must pay estimated taxes. 
C)  S corporations that owe $5,000 in LIFO recapture tax only must pay estimated taxes. 
D)  S corporations with a federal income tax liability of $100 due to the excess net passive income tax must pay estimated taxes. 
E)  None of the choices are correct.
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
117) Suppose SPA Corporation was formed by Sara Incorporated (a C corporation that is 100percent owned by Sara) and Sara's friend Tyson. In exchange for 50percent of the stock of SPA, Sara contributed $100,000. In exchange for the remaining 50percent of the SPA stock, Tyson contributed a building with a fair market value of $100,000 and an adjusted tax basis of $60,000. How much gain is Tyson required to recognize on the contribution? Is SPA eligible to elect S corporation status? 
A)  S corporations never pay estimated taxes. 
B)  S corporations with a federal income tax liability of $500 due to the built-in gains tax or excess net passive income tax must pay estimated taxes. 
C)  S corporations that owe $5,000 in LIFO recapture tax only must pay estimated taxes. 
D)  S corporations with a federal income tax liability of $100 due to the excess net passive income tax must pay estimated taxes. 
E)  None of the choices are correct.
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
117) Suppose SPA Corporation was formed by Sara Incorporated (a C corporation that is 100percent owned by Sara) and Sara's friend Tyson. In exchange for 50percent of the stock of SPA, Sara contributed $100,000. In exchange for the remaining 50percent of the SPA stock, Tyson contributed a building with a fair market value of $100,000 and an adjusted tax basis of $60,000. How much gain is Tyson required to recognize on the contribution? Is SPA eligible to elect S corporation status?

Question 2

Suppose that at the beginning of 2020 Jamaal's basis in his S corporation stock is $1,000 and he has a $10,000 debt basis associated with a $10,000 loan he made to the S corporation. In 2020, Jamaal's share of S corporation income is $4,000, and he received a $7,000 distribution from the S corporation. How muchtotal income does Jamaal report in 2020 from these transactions?

Accepted Answer

A)  $0 
B)  $4,000 
C)  $6,000 
D)  $7,000 
E)  None of the choices are correct. 
A)  $0 
B)  $4,000 
C)  $6,000 
D)  $7,000 
E)  None of the choices are correct.

Question 3

The specific identification method is a method an S corporation may use to allocate its income across short tax years that result from an involuntary S election termination.

Accepted Answer

A) True 
 B)False

Question 4

Publicly traded corporations cannot be treated as S corporations.

Accepted Answer

A) True 
 B)False

Question 5

Jackson is the sole owner of JJJ Corporation (an S corporation). At the beginning of 2020, Jackson's basis in his JJJ stock was $8,000. For 2020, JJJ reported a ($30,000) ordinary business loss (not a passive loss) and $4,000 of long-term capital gains. Assuming Jackson's tax basis and his at-risk amount are the same, what is Jackson's stock basis at the end of the year and how much of the ordinary business loss is he allowed to deduct in 2020?

Accepted Answer

Jackson's stock basis at the end of the

Question 6

Clampett, Incorporated, has been an S corporation since its inception. On July 15, 2021, Clampett, Incorporated, distributed $50,000 to J.D. His basis in his Clampett, Incorporated, stock on January 1, 2021, was $45,000. For 2021, J.D. was allocated $10,000 of ordinary income from Clampett, Incorporated, and no separately stated items. What is J.D.'s basis in his Clampett, Incorporated, stock after all transactions in 2021?

Accepted Answer

A)  $40,000 
B)  $30,000 
C)  $20,000 
D)  $5,000 
E)  None of the choices are correct. 
A)  $40,000 
B)  $30,000 
C)  $20,000 
D)  $5,000 
E)  None of the choices are correct.

Question 7

Clampett, Incorporated, has been an S corporation since its inception. On July 15, 2021, Clampett, Incorporated, distributed $50,000 to J.D. His basis in his Clampett, Incorporated, stock on January 1, 2021, was $45,000. For 2021, J.D. was allocated $10,000 of ordinary income from Clampett, Incorporated, and no separately stated items. How much capital gain does J.D. recognize related to Clampett, Incorporated, in 2021?

Accepted Answer

A)  $60,000 
B)  $50,000 
C)  $20,000 
D)  $10,000 
E)  None of the choices are correct. 
A)  $60,000 
B)  $50,000 
C)  $20,000 
D)  $10,000 
E)  None of the choices are correct.

Question 8

Which of the following is not an adjustment to an S corporation shareholder's stock basis?

Accepted Answer

A)  Increase for any contributions to the S corporation during the year. 
B)  Increase for shareholder's share of ordinary business income. 
C)  Decrease for shareholder's share of nondeductible items. 
D)  Increase for distributions during the year. 
E)  None of the choices are correct. 
A)  Increase for any contributions to the S corporation during the year. 
B)  Increase for shareholder's share of ordinary business income. 
C)  Decrease for shareholder's share of nondeductible items. 
D)  Increase for distributions during the year. 
E)  None of the choices are correct.

Question 9

At the beginning of the year, Harold, Missy, and Ranae formed HMR Corporation as an S corporation. For one-third of the HMR stock, Harold contributed $50,000 cash and land with a fair market value of $75,000 and adjusted tax basis of $60,000. The land was subject to a $45,000 mortgage, which was assumed by HMR on the formation. Missy and Ranae each contributed $80,000 cash to HMR for one-third of the HMR stock. What is Harold's basis in the HMR stock after the formation? What is Missy's basis in her HMR stock after the formation?

Accepted Answer

Harold's stock basis is $65,00

Question 10

ABC was formed as a calendar-year S corporation with Alan, Brenda, and Conner as equal shareholders. On May 1, 2020, ABC's S election was terminated after Conner sold his ABC shares (one-third of all shares) to his solely owned C corporation, Conner, Incorporated ABC reported business income for 2020 as follows: (Assume that there are 365 days in the year.)
   If ABC uses the specific identification method to allocate income, how much will it allocate to the S corporation short year and C corporation short year?

Accepted Answer

S corporation short

Question 11

For S corporations with earnings and profits from prior C corporation years, the taxation of distributions to the shareholder isgoverned by rules very similar to the rules for partnerships.

Accepted Answer

A) True 
 B)False

Question 12

The IRS may consent to an early reelection of S corporation status after a termination under which of the following?

Accepted Answer

A)  The corporation is now owned more than 10 percent by shareholders who were not owners at the time of termination. 
B)  The corporation is now owned more than 60 percent by shareholders who were owners at the time of termination. 
C)  The termination was not reasonably within the control of the corporation or shareholders with a substantial interest in the corporation and was not part of a planned termination by the corporation or shareholders. 
D)  The corporation had only two ineligible shareholders at the termination date. 
E)  None of the choices are correct. 
A)  The corporation is now owned more than 10 percent by shareholders who were not owners at the time of termination. 
B)  The corporation is now owned more than 60 percent by shareholders who were owners at the time of termination. 
C)  The termination was not reasonably within the control of the corporation or shareholders with a substantial interest in the corporation and was not part of a planned termination by the corporation or shareholders. 
D)  The corporation had only two ineligible shareholders at the termination date. 
E)  None of the choices are correct.

Question 13

Jackson is the sole owner of JJJ Corporation (an S corporation). At the end of 2020, Jackson's basis in his JJJ stock and his at-risk amount were $0. Jackson also had a $10,000 suspended ordinary business loss (suspended at the tax-basis and at-risk level). JJJ's S election was terminated effective the end of the day on December 31, 2020. If Jackson contributes $6,000 cash to JJJ on July 1, 2021, and $3,000 cash on January 5, 2022, how much of his $10,000 suspended loss will he be allowed to deduct and how much disappears unused?

Accepted Answer

Jackson will be allowed to deduct $6,000

Question 14

Bobby T (75percent owner) would like to terminate the S corporation status of DJ, Incorporated, but Dallas (5percent owner) does not want to terminate S corporation status. Bobby T can terminatethe Scorporation status for DJ, Incorporated, without Dallas's consent.

Accepted Answer

A) True 
 B)False

Question 15

An S corporation shareholder's allocable share of business income that is determined to be from a passive activity is considered net investment income for purposes of the net investment income tax.

Accepted Answer

A) True 
 B)False

Question 16

For S corporations without earnings and profits from prior C corporation years, the taxation of cash distributions to the shareholder isgoverned by rules very similar to the rules for partnerships.

Accepted Answer

A) True 
 B)False

Question 17

Similar to an S corporation shareholder's stock basis, the AAA may not have a negative balance.

Accepted Answer

A) True 
 B)False

Question 18

S corporation shareholders are not allowed to include any S corporation-level debt in their stock basis.

Accepted Answer

A) True 
 B)False

Question 19

After terminating or voluntarily revoking S corporation status, a corporation may elect it again, but it generally must wait until the beginning of the third tax year after the tax year in which it terminated the election.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is the correct order in which loss limitation rules are applied?

Accepted Answer

A)  Basis rules first, at-risk rules second, passive loss rules third 
B)  Passive loss rules first, at-risk rules second, basis rules third 
C)  Basis rules first, passive loss rules second, at-risk rules third 
D)  Passive loss rules first, basis rules second, at-risk rules third 
E)  None of the choices are correct. 
A)  Basis rules first, at-risk rules second, passive loss rules third 
B)  Passive loss rules first, at-risk rules second, basis rules third 
C)  Basis rules first, passive loss rules second, at-risk rules third 
D)  Passive loss rules first, basis rules second, at-risk rules third 
E)  None of the choices are correct.

Which of the following statements is correct regarding S corporation estimated taxes?

The specific identification method is a method an S corporation may use to allocate its income across short tax years that result from an involuntary S election termination.

Publicly traded corporations cannot be treated as S corporations.

Which of the following is not an adjustment to an S corporation shareholder's stock basis?

For S corporations with earnings and profits from prior C corporation years, the taxation of distributions to the shareholder isgoverned by rules very similar to the rules for partnerships.

The IRS may consent to an early reelection of S corporation status after a termination under which of the following?

Bobby T (75percent owner) would like to terminate the S corporation status of DJ, Incorporated, but Dallas (5percent owner) does not want to terminate S corporation status. Bobby T can terminatethe Scorporation status for DJ, Incorporated, without Dallas's consent.

An S corporation shareholder's allocable share of business income that is determined to be from a passive activity is considered net investment income for purposes of the net investment income tax.

For S corporations without earnings and profits from prior C corporation years, the taxation of cash distributions to the shareholder isgoverned by rules very similar to the rules for partnerships.

Similar to an S corporation shareholder's stock basis, the AAA may not have a negative balance.

S corporation shareholders are not allowed to include any S corporation-level debt in their stock basis.

After terminating or voluntarily revoking S corporation status, a corporation may elect it again, but it generally must wait until the beginning of the third tax year after the tax year in which it terminated the election.

Which of the following is the correct order in which loss limitation rules are applied?

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Business Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Non-Liquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 11: S Corporations

Which of the following statements is correct regarding S corporation estimated taxes?

The specific identification method is a method an S corporation may use to allocate its income across short tax years that result from an involuntary S election termination.

Publicly traded corporations cannot be treated as S corporations.

Which of the following is not an adjustment to an S corporation shareholder's stock basis?

For S corporations with earnings and profits from prior C corporation years, the taxation of distributions to the shareholder isgoverned by rules very similar to the rules for partnerships.

The IRS may consent to an early reelection of S corporation status after a termination under which of the following?

Bobby T (75percent owner) would like to terminate the S corporation status of DJ, Incorporated, but Dallas (5percent owner) does not want to terminate S corporation status. Bobby T can terminatethe Scorporation status for DJ, Incorporated, without Dallas's consent.

An S corporation shareholder's allocable share of business income that is determined to be from a passive activity is considered net investment income for purposes of the net investment income tax.

For S corporations without earnings and profits from prior C corporation years, the taxation of cash distributions to the shareholder isgoverned by rules very similar to the rules for partnerships.

Similar to an S corporation shareholder's stock basis, the AAA may not have a negative balance.

S corporation shareholders are not allowed to include any S corporation-level debt in their stock basis.

After terminating or voluntarily revoking S corporation status, a corporation may elect it again, but it generally must wait until the beginning of the third tax year after the tax year in which it terminated the election.

Which of the following is the correct order in which loss limitation rules are applied?

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Business Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Non-Liquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters