Question 1

For an S corporation to elect to use a fiscal year other than a permitted year, the fiscal year elected must have a maximum deferral period of

Accepted Answer

A) one month. 
B) two months. 
C) three months. 
D) six months. 
A) one month. 
B) two months. 
C) three months. 
D) six months.

Question 2

Identify which of the following statements is false.

Accepted Answer

A) A C corporation short-year income tax liability must be determined on an annualized basis. 
B) If the termination of an S election is considered to be inadvertent, then the election is permitted to continue in place as if the termination had never occurred. 
C) If an S election is terminated and the termination is not considered to be inadvertent, a ten-tax-year waiting period is required before making a new election. 
D) A corporation can obtain relief for a late S election if the IRS consents. 
A) A C corporation short-year income tax liability must be determined on an annualized basis. 
B) If the termination of an S election is considered to be inadvertent, then the election is permitted to continue in place as if the termination had never occurred. 
C) If an S election is terminated and the termination is not considered to be inadvertent, a ten-tax-year waiting period is required before making a new election. 
D) A corporation can obtain relief for a late S election if the IRS consents.

Question 3

All shareholders must consent to the revocation of S status.

Accepted Answer

A) True 
 B)False

Question 4

An electing S corporation has a $30,000 ordinary loss for the non-leap year. On January 1, Beverly and Sonya own equally all of the S corporation stock. On the 146th day of the year, Beverly gives her one-half of the S corporation stock to her daughter Becky. How much of the $30,000 ordinary loss is allocated to Sonya?

Accepted Answer

A) $25,000 
B) $15,000 
C) $10,000 
D) $6,000 
A) $25,000 
B) $15,000 
C) $10,000 
D) $6,000

Question 5

When a Sec. 444 fiscal-year election is made, the S corporation makes required payments to the IRS in order to continue to use the fiscal year as its tax year. Which of the following statements about the tax year is correct?

Accepted Answer

A) The Sec. 444 payment is deductible by the S corporation as an income tax. 
B) The Sec. 444 payment is allocated ratably to each shareholder and claimed as a tax payment on their own tax return(s). 
C) The Sec. 444 payments are refundable if the S election is terminated. 
D) The Sec. 444 payments must be made quarterly on the same dates that the S corporation's estimated tax payments are otherwise due. 
A) The Sec. 444 payment is deductible by the S corporation as an income tax. 
B) The Sec. 444 payment is allocated ratably to each shareholder and claimed as a tax payment on their own tax return(s). 
C) The Sec. 444 payments are refundable if the S election is terminated. 
D) The Sec. 444 payments must be made quarterly on the same dates that the S corporation's estimated tax payments are otherwise due.

Question 6

The election of Subchapter S status by a corporation is valid only if all shareholders consent to the election.

Accepted Answer

A) True 
 B)False

Question 7

Identify which of the following statements is true.

Accepted Answer

A) The S corporation rules were enacted to allow small corporations to enjoy the nontax advantages of the corporate form of business without being subject to the tax disadvantage of double taxation. 
B) A partnership can elect to be taxed as a corporation under the check-the-box regulations. As a corporation, an S election can be made. 
C) For C corporations that desire to be taxed like a partnership, the S corporation rules provide a practical alternative for an existing C corporation to obtain many of the tax benefits of being taxed as a partnership. 
D) All of the above are true. 
A) The S corporation rules were enacted to allow small corporations to enjoy the nontax advantages of the corporate form of business without being subject to the tax disadvantage of double taxation. 
B) A partnership can elect to be taxed as a corporation under the check-the-box regulations. As a corporation, an S election can be made. 
C) For C corporations that desire to be taxed like a partnership, the S corporation rules provide a practical alternative for an existing C corporation to obtain many of the tax benefits of being taxed as a partnership. 
D) All of the above are true.

Question 8

The accumulated adjustments account is the cumulative total of ordinary income or loss and separately stated items (excluding tax-exempt income and expenses)for the most recent continuous period during which the corporation has been an S corporation.

Accepted Answer

A) True 
 B)False

Question 9

Rocky Corporation, an S corporation, reports the following results for the current year:   Rocky's AAA and accumulated E&P balances at the beginning of the year are $80,000 and $50,000, respectively. Rocky makes a $100,000 cash distribution to its sole shareholder on June 1 and a second $100,000 cash distribution on December 1. The shareholder's basis for Rocky stock on January 1 was $120,000. Discuss the tax consequences of these transactions.

Accepted Answer

The basis of the shareholder's stock is

Question 10

Tax-exempt interest earned by an S corporation is not reported to its shareholders because it is excluded from the shareholders' gross income.

Accepted Answer

A) True 
 B)False

Question 11

Zebra Corporation has always been an S corporation and is 100% owned by Paul. Paul has a basis of $40,000 in his Zebra stock at the beginning of the year. During the year, Zebra has an ordinary loss of $20,000 and a long-term capital gain of $10,000. In addition, Zebra Corporation distributed $55,000 in cash to Paul on December 1. Will the distribution cause Paul to recognize a gain? If so, what are its amount and character?

Accepted Answer

Basis adjustments for distributions made

Question 12

Which of the following conditions will not cause an S election to be terminated?

Accepted Answer

A) exceeding the 100-shareholder limit 
B) creating a second class of stock having a dividend preference 
C) selecting an improper tax year 
D) failing to file a timely tax return 
A) exceeding the 100-shareholder limit 
B) creating a second class of stock having a dividend preference 
C) selecting an improper tax year 
D) failing to file a timely tax return

Question 13

As a general rule, the S corporation's ordinary income or loss and separately stated items are allocated based on the amount of stock owned by each shareholder on each day of the S corporation's tax year.

Accepted Answer

A) True 
 B)False

Question 14

Identify which of the following statements is false.

Accepted Answer

A) The AAA balance can be negative, but the shareholder's basis in the S corporation stock cannot be less than zero. 
B) The AAA represents the cumulative income/loss recognized in post-1982 S corporation years. 
C) Nonmoney property distributions made by an S corporation having accumulated E&P are treated differently when determining the corporate-level gain recognized under Sec. 311 than are property distributions made by an S corporation without accumulated E&P. 
D) Tax-exempt income does not increase the AAA but increases the basis of the S corporation stock. 
A) The AAA balance can be negative, but the shareholder's basis in the S corporation stock cannot be less than zero. 
B) The AAA represents the cumulative income/loss recognized in post-1982 S corporation years. 
C) Nonmoney property distributions made by an S corporation having accumulated E&P are treated differently when determining the corporate-level gain recognized under Sec. 311 than are property distributions made by an S corporation without accumulated E&P. 
D) Tax-exempt income does not increase the AAA but increases the basis of the S corporation stock.

Question 15

Identify which of the following statements is true.

Accepted Answer

A) A trust can own S corporation stock and have a C corporation as a beneficiary as long as the corporation is the sole beneficiary. 
B) A QSST is an arrangement whereby the stock owned by a number of shareholders is placed under trust control for purposes of exercising the stock voting rights. 
C) A testamentary trust can be converted into a QSST trust. 
D) All of the above are false. 
A) A trust can own S corporation stock and have a C corporation as a beneficiary as long as the corporation is the sole beneficiary. 
B) A QSST is an arrangement whereby the stock owned by a number of shareholders is placed under trust control for purposes of exercising the stock voting rights. 
C) A testamentary trust can be converted into a QSST trust. 
D) All of the above are false.

Question 16

Jeff owns 50% of an S corporation's stock with a basis in his stock of $50,000 on January 1. In addition, the S corporation owes Jeff $30,000 on January 1. The debt has a basis of $30,000 and is evidenced by a note. The S corporation reports an ordinary loss of $150,000 for the current year. The next year, it reports ordinary income of $20,000. On January 1 of the third year, the note is repaid. Due to the repayment of the note, Jeff must report what?

Accepted Answer

The answer of Jeff owns 50% of an S corporation's...

Question 17

Woods Corporation has operated as a C corporation for the last seven years. The corporation has assets with a $500,000 adjusted basis and a $700,000 FMV. Liabilities are $200,000. Wolf Woods, a calendar-year taxpayer, owns all of the Woods Corporation stock. The corporation has a June 30 year-end and uses the accrual method of accounting. In order to reduce his total combined corporate and personal federal income tax liability, Wolf's CPA has told him to convert the corporation to S corporation status. Wolf would like to complete the conversion on the last day of the corporation's tax year. What tax issues should Wolf and his CPA consider with respect to the S election?

Accepted Answer

The questions listed below are based on

Question 18

King Corporation, an electing S corporation, is 100% owned by Crystal. On January 1 of the current year, her adjusted basis in the King stock is $30,000. During the year, King reports an ordinary loss of $30,000, tax-exempt municipal bond income of $15,000, dividend income from domestic corporations of $5,000, a long-term capital loss of $20,000, and a short-term capital loss of $30,000. What is Crystal's basis for the King stock at the end of the year?

Accepted Answer

@#IMG-DLM& Only $50,000 of the $80,000 t

Question 19

Which of the following corporate tax levies are imposed on an S corporation?

Accepted Answer

A) corporate income tax 
B) corporate alternative minimum tax 
C) accumulated earnings tax 
D) None of these taxes are imposed on an S corporation. 
A) corporate income tax 
B) corporate alternative minimum tax 
C) accumulated earnings tax 
D) None of these taxes are imposed on an S corporation.

Question 20

Identify which of the following statements is true.

Accepted Answer

A) An election for an S corporation to use the Sec. 179 expensing election is made by the corporation and not by its shareholders. 
B) The S corporation's separately stated items are in general the same ones that apply in partnership taxation. 
C) An S corporation cannot claim a dividends-received deduction. 
D) All of the above are true. 
A) An election for an S corporation to use the Sec. 179 expensing election is made by the corporation and not by its shareholders. 
B) The S corporation's separately stated items are in general the same ones that apply in partnership taxation. 
C) An S corporation cannot claim a dividends-received deduction. 
D) All of the above are true.

For an S corporation to elect to use a fiscal year other than a permitted year, the fiscal year elected must have a maximum deferral period of

Identify which of the following statements is false.

All shareholders must consent to the revocation of S status.

When a Sec. 444 fiscal-year election is made, the S corporation makes required payments to the IRS in order to continue to use the fiscal year as its tax year. Which of the following statements about the tax year is correct?

The election of Subchapter S status by a corporation is valid only if all shareholders consent to the election.

Identify which of the following statements is true.

The accumulated adjustments account is the cumulative total of ordinary income or loss and separately stated items (excluding tax-exempt income and expenses)for the most recent continuous period during which the corporation has been an S corporation.

Tax-exempt interest earned by an S corporation is not reported to its shareholders because it is excluded from the shareholders' gross income.

Which of the following conditions will not cause an S election to be terminated?

As a general rule, the S corporation's ordinary income or loss and separately stated items are allocated based on the amount of stock owned by each shareholder on each day of the S corporation's tax year.

Identify which of the following statements is false.

Identify which of the following statements is true.

Which of the following corporate tax levies are imposed on an S corporation?

Identify which of the following statements is true.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters

Exam 11: S Corporations

For an S corporation to elect to use a fiscal year other than a permitted year, the fiscal year elected must have a maximum deferral period of

Identify which of the following statements is false.

All shareholders must consent to the revocation of S status.

When a Sec. 444 fiscal-year election is made, the S corporation makes required payments to the IRS in order to continue to use the fiscal year as its tax year. Which of the following statements about the tax year is correct?

The election of Subchapter S status by a corporation is valid only if all shareholders consent to the election.

Identify which of the following statements is true.

The accumulated adjustments account is the cumulative total of ordinary income or loss and separately stated items (excluding tax-exempt income and expenses)for the most recent continuous period during which the corporation has been an S corporation.

Tax-exempt interest earned by an S corporation is not reported to its shareholders because it is excluded from the shareholders' gross income.

Which of the following conditions will not cause an S election to be terminated?

As a general rule, the S corporation's ordinary income or loss and separately stated items are allocated based on the amount of stock owned by each shareholder on each day of the S corporation's tax year.

Identify which of the following statements is false.

Identify which of the following statements is true.

Which of the following corporate tax levies are imposed on an S corporation?

Identify which of the following statements is true.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters