Exam 11: S Corporations

Helmut and Sergei own all the stock of Zappo Corporation, a calendar-year domestic corporation. On January 30 of the current year, Sergei sells his entire interest in the Zappo stock to Nils. All three individuals are U.S. citizens. Can an S election be made for the current year?

What is a permitted year?

Identify which of the following statements is false.

Cactus Corporation, an S corporation, had accumulated earnings and profits of $100,000 at the beginning of 2017. Tex and Shirley each own 50% of the stock and have a basis in their stock of $50,000 on January 1, 2017. Cactus does not make any distributions during 2009, but had $200,000 of ordinary income. In 2018, ordinary income was $100,000 and distributions were $100,000. What is Tex's basis at January 1, 2019?

Mashburn Corporation is an S corporation that uses a fiscal year ending June 30 as its tax year. When is Mashburn Corporation's income tax return due?

Which one of the following special loss limitations applies to an S corporation?

Eagle Corporation has always been an S corporation. Eagle is 100% owned by Katy. Katy's adjusted basis in the Eagle stock is $100,000 on January 1 of the current year. During the current year, Eagle distributes XYZ stock (a capital asset)to Katy. The XYZ stock has a $50,000 FMV and a $40,000 adjusted basis on Eagle's books. The XYZ stock has been held as an investment for four years by Eagle. Eagle Corporation reports $40,000 of ordinary income in the current year. What is Katy's basis in the Eagle stock at the beginning of the next year?

Gofer Corporation, an S corporation, is owned equally by Mahmoud and Kwame. The corporation had long-term capital gains of $100,000 and ordinary income of $90,000 for the current year and made no distributions. What is the amount of ordinary income from S corporation activities that Mahmoud must report?

Identify which of the following statements is true.

Identify which of the following statements is true.

Which one of the following individuals or entities is ineligible to be an S corporation shareholder?

Cook's Outlet has been an S corporation since its inception six years ago. On January 1 of the current year, the corporation's two equal shareholders, Davis and Dane, had adjusted bases of $150,000 and $175,000, respectively, for their S corporation's stock. The shareholders plan to have the corporation distribute land with a $50,000 adjusted basis and a $200,000 FMV in the current year. Ordinary income is expected to be $180,000 in the current year. What tax issues should Davis and Dane consider with respect to the distribution?

Caravan Corporation has always been an S corporation. Caravan Corporation is 100% owned by Alan Merten. On January 1, Alan has an adjusted basis of $50,000 in his Caravan stock. During the year, Caravan reports ordinary income of $60,000, a long-term capital gain of $10,000, and a charitable contribution of $5,000. Alan receives a $20,000 cash distribution from Caravan on December 1. What income does Alan recognize from the distribution, and what is his basis in the Caravan stock at year-end?

An S corporation is permitted an automatic extension of time for filing its tax return. The automatic extension period is

Can loss or credit carryforwards from a previous C corporation tax year help reduce the built-in gains tax?

Mary, a U.S. citizen, owned 25% of the stock of Floran Corporation, an electing S corporation. At the time of her death, the Floran stock may go to all the following without affecting the S election except

The recognition period for the built-in gains tax extends for how many years after the S election takes effect?

Which of the following items is not separately stated for an S corporation?

Arnie is a 50% shareholder in Energy Corporation, an S corporation. The S corporation had an $80,000 ordinary loss last year and $10,000 of ordinary income this year. Before accounting for last year's losses, Arnie's basis in his Energy stock is $32,000 and Energy owed Arnie $4,000 (an unsecured note having a basis of $4,000)at the end of last year. In addition, Energy had $100,000 of other liabilities owed to creditors other than Arnie at the end of last year. What income and loss must Arnie report on his current return as a result of owning the Energy stock (ignoring the at-risk and passive activity limitations)?

Identify which of the following statements is true.