Exam 11: S Corporations

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?

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

An S corporation is not treated as a corporate taxpayer with respect to which one of the following fringe benefits?

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

Identify which of the following statements is true.

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?

Identify which of the following statements is true.

A corporation must make an S election for the current year after March 15 in the case of a calendar-year corporation.

Troy owns 50% of Dot.Com,an e-commerce company.His S corporation stock basis at the beginning of the year is $300,000.Dot.Com has not done well this year and will report an ordinary loss of $875,000.Troy's marginal tax rate for the current year is 35%.What tax issues should Troy consider with respect to the loss?

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

For the calendar year,Elk Corporation,an S corporation,has book income of $55,000,which includes $45,000 from operations and a $10,000 net long-term capital gain.During the year,$22,500 is distributed to Elk's three equal shareholders,all of whom are calendar-year taxpayers.What are Elk's total ordinary income and capital gain pass-throughs for the year?

Identify which of the following statements is true.

Shanghai Corporation was organized and elected S status in the current year.How much passive investment income can Shanghai earn and retain its S status?

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

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

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

Shamrock Corporation has two classes of common stock outstanding.The Class A and Class B common stock give the shareholders identical rights and interests in the profits and assets of the corporation.Class A has one vote per share.Class B is nonvoting.Can Shamrock Corporation make an S corporation election?

Zinc Corporation is created in the current year and promptly makes an S election.How much passive income can it earn this year without fear of losing its S corporation status or being subject to the Sec.1375 tax on excess net passive income?

S shareholders cannot increase the basis of their stock by a ratable share of the general S corporation liabilities.

Trusts that can own S corporation stock include all of the following except