Exam 16: S Corporations

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

AIRE was initially formed as an S corporation three years ago.AIRE has four equal shareholders Adam,Irene,Raymond,and Ethan.Raymond and Ethan would like to terminate the S election.However,Adam and Irene are opposed to the idea.Can Raymond and Ethan make a voluntary election to terminate the S election without the consent of Adam and/or Irene? Explain.

Hazel is the sole shareholder of Maple Corp.In 2018 Maple operated as a C corporation and reported $15,000 of taxable income (and earnings and profits).In 2018,Maple elected S corporation status.During 2019 Maple reported $12,000 of ordinary business income and no separately stated items.It also distributed $25,000 to Hazel.What is the amount and character of income Hazel must recognize on the distribution? What is Hazel's stock basis at the end of 2019 (after accounting for the distribution)if her basis at the beginning of the year was $5,000?

The estimated tax payment rules for S corporations generally follow the rules for C corporations.

S corporations are required to recognize both gains and losses on non-liquidating distributions of property to shareholders.

Which of the following is not a separately stated item for S corporations?

Clampett,Inc.has been an S corporation since its inception.On July 15,2019,Clampett,Inc.distributed $50,000 to J.D.His basis in his Clampett,Inc.stock on January 1,2019,was $45,000.For 2019,J.D.was allocated $10,000 of ordinary income from Clampett,Inc.and no separately stated items.What is J.D.'s basis in his Clampett,Inc.stock after all transactions in 2019?

Bobby T (95% owner)would like to elect S corporation status for DJ,Inc.but Dallas (5% owner)does not want to elect S corporation status.Bobby T cannot elect S status for DJ,Inc.without Dallas' consent.

On March 15,2018,J.D.sold his Clampett,Inc.(an S corporation)shares to Ellie Mae,Inc.(a C corporation),terminating Clampett,Inc.'s S election on March 15,2018.Absent permission from the IRS,what is the earliest date Clampett,Inc.may again elect to be taxed as an S corporation? 

XYZ Corporation (an S corporation)is owned by Jane and Rebecca who are each 50% shareholders.At the beginning of the year,Jane's basis in her XYZ stock was $40,000.XYZ reported the following tax information for 2018. Description Amount Sales reverue \ 30,000 Cost of goods sold (200,000) Long-tenn capital gain 8,000 Dividend income 5,000 Tax exernpt interest 3,000 Salary to owners (120,000) Ermployee wages (50,000) Depreciation expenses (12,000) Miscellaraous expenses (10,000) Overall net incorne \ 354,000 Required: a.What amount of ordinary business income is allocated to Jane? b.What is the amount and character of separately stated items allocated to Jane? c.What is Jane's basis in her XYZ corp.stock at the end of the year?

Parker is a 100% shareholder of Johnson Corp.(an S corporation).At the beginning of 2018,Parker's basis in his Johnson Corp.stock was $14,000.During 2018,Parker loaned $20,000 to Johnson Corp.and Johnson Corp.reported a $25,000 ordinary business loss and no separately stated items.In 2019,Johnson Corp.reported $8,000 of ordinary business income. a.How much of the $25,000 ordinary loss allocated to Parker clears the tax basis hurdle for deductibility in 2018? b.What is Parker's stock and debt basis at the end of 2018? c.What is Parker's stock and debt basis at the end of 2019?

Like partnerships,an S corporation shareholder's basis is dynamic and must be adjusted annually.

Which of the following is a requirement to be an S corporation?

RGD Corporation was a C corporation from its inception in 2014 through 2017.However,it elected S corporation status effective January 1,2018.RGD had $50,000 of earnings and profits at the end of 2017.RGD reported the following information for its 2018 tax year. Description Amount Consulting revenue \ 130,000 Salary to owners (50,000) Employee wages (40,000) Depreciation expense (8,000) Interest income 50,000 Dividend income Overall net income   What amount of excess net passive income tax is RGD liable for in 2018? (Round your answer for excess net passive income to the nearest thousand).