Question 1

An S shareholder's basis is increased by stock purchases and capital contributions.

Accepted Answer

A) True 
 B)False

Question 2

Form 1120S provides an S shareholder's computation of his or her stock basis.

Accepted Answer

A) True 
 B)False

Question 3

An S shareholder's basis is decreased by distributions treated as being paid from AAA.

Accepted Answer

A) True 
 B)False

Question 4

Arizona is a(n) ____________________ property state for purposes of the S corporation requirements.

Accepted Answer

The answer of Arizona is a(n) ____________________ property state for...

Question 5

Any distribution of cash or property by a corporation that does not exceed the balance of AAA with respect to S stock during a post-termination transition period of approximately one year is applied against and reduces the basis of the S stock.

Accepted Answer

A) True 
 B)False

Question 6

An S corporation reports a recognized built-in gain of $110,000 and taxable income of $98,000.The company carries an $8,000 NOL carryforward from a C corporation year,and a $7,000 business credit carryforward from a C corporation year.The built-in gains tax liability is:

Accepted Answer

A) $31,500. 
B) $28,700. 
C) $24,500. 
D) $0. 
E) Some other amount. 
A) $31,500. 
B) $28,700. 
C) $24,500. 
D) $0. 
E) Some other amount.

Question 7

An S corporation cannot incur a tax liability at the corporation level.

Accepted Answer

A) True 
 B)False

Question 8

You are given the following facts about a solely owned S corporation.What is the shareholder's ending stock basis? Increase in AAA $31,000 Increase in OAA 6,300 Payroll tax penalty 2,140 Beginning stock basis 39,800 Stock purchases 22,000 Tax-exempt insurance proceeds 4,800 Insurance premiums paid (nondeductible) 2,700 ​

Accepted Answer

A) $61,800 
B) $68,100 
C) $99,100 
D) $100,100 
E) Some other amount 
A) $61,800 
B) $68,100 
C) $99,100 
D) $100,100 
E) Some other amount

Question 9

All tax preference items flow through the S corporation,to be included in the shareholders' AMT calculations.

Accepted Answer

A) True 
 B)False

Question 10

Identify a disadvantage of being an S corporation.

Accepted Answer

A) Estates can be shareholders. 
B) Losses flow through immediately to the shareholders. 
C) The AMT on corporations is avoided. 
D) Tax-exempt income flows through as excludible to shareholders. 
E) None of the above is a disadvantage of the S election. 
A) Estates can be shareholders. 
B) Losses flow through immediately to the shareholders. 
C) The AMT on corporations is avoided. 
D) Tax-exempt income flows through as excludible to shareholders. 
E) None of the above is a disadvantage of the S election.

Question 11

What statement is correct with respect to an S corporation?

Accepted Answer

A) There is no advantage to elect § 1244 stock. 
B) An S corporation can own up to 85% of an insurance company. 
C) A resident alien may be a shareholder. 
D) A voting trust arrangement is not available. 
E) None of the above statements is true. 
A) There is no advantage to elect § 1244 stock. 
B) An S corporation can own up to 85% of an insurance company. 
C) A resident alien may be a shareholder. 
D) A voting trust arrangement is not available. 
E) None of the above statements is true.

Question 12

The termination of an S election occurs on the day after a corporation ceases to be a qualifying S corporation.

Accepted Answer

A) True 
 B)False

Question 13

Claude Bergeron sold 1,000 shares of Ditta,Inc. ,an S corporation,for $12,000.He had owned the stock for three years and had a stock basis of $111,000 in the shares.Claude is single,and he is the original owner of the § 1244 stock shares.Calculate the appropriate tax treatment.

Accepted Answer

A) No gain or loss. 
B) $50,000 LTCL;$49,000 ordinary deduction. 
C) $50,000 ordinary deduction;$49,000 LTCL. 
D) $99,000 long-term capital loss. 
A) No gain or loss. 
B) $50,000 LTCL;$49,000 ordinary deduction. 
C) $50,000 ordinary deduction;$49,000 LTCL. 
D) $99,000 long-term capital loss.

Question 14

When an S corporation liquidates,which of its tax attributes disappear?

Accepted Answer

A) AAA. 
B) AEP. 
C) Suspended losses. 
D) All of the above items disappear. 
A) AAA. 
B) AEP. 
C) Suspended losses. 
D) All of the above items disappear.

Question 15

Beginning in 2015,the AAA of Amit,Inc. ,an S corporation,has a balance of $614,000.During the year,the following items occur. Operating income $501,000 Interest income 6,500 Dividend income 13,020 Municipal bond interest income 6,000 Long-term capital loss from sale of investment land 7,400 Section 179 depreciation deduction 6,000 Charitable contributions 19,000 Cash distributions 57,000 ​ Amit's ending AAA balance is:

Accepted Answer

A) $1,055,620. 
B) $1,185,150. 
C) $1,191,150. 
D) $1,242,150. 
E) Some other amount. 
A) $1,055,620. 
B) $1,185,150. 
C) $1,191,150. 
D) $1,242,150. 
E) Some other amount.

Question 16

If an S corporation shareholder's basis in a loan to the entity has been _________________,the shareholder recognizes gross income when the S corporation repays the shareholder.

Accepted Answer

The answer of If an S corporation shareholder's basis in...

Question 17

Tax-exempt income is not separately stated on Schedule K of Form 1120S.

Accepted Answer

A) True 
 B)False

Question 18

Distributions of appreciated property by an S corporation are not taxable to the entity.

Accepted Answer

A) True 
 B)False

Question 19

The Section 179 expense deduction is a Schedule K item on the Form 1120S.

Accepted Answer

A) True 
 B)False

Question 20

A calendar year C corporation reports a $41,000 NOL in 2014,but it elects S status for 2015 and generates an NOL of $30,000 in that year.At all times during 2015,the stock of the corporation was owned by the same 10 shareholders,each of whom owned 10% of the stock.Kris,one of the 10 shareholders,holds an S stock basis of $2,300 at the beginning of 2015.How much of the 2015 loss,if any,is deductible by Kris?

Accepted Answer

A) $0 
B) $2,300 
C) $3,000 
D) $7,100 
A) $0 
B) $2,300 
C) $3,000 
D) $7,100

Exam 22: S Corporations

An S shareholder's basis is increased by stock purchases and capital contributions.

Form 1120S provides an S shareholder's computation of his or her stock basis.

An S shareholder's basis is decreased by distributions treated as being paid from AAA.

Arizona is a(n) ____________________ property state for purposes of the S corporation requirements.

Any distribution of cash or property by a corporation that does not exceed the balance of AAA with respect to S stock during a post-termination transition period of approximately one year is applied against and reduces the basis of the S stock.

An S corporation reports a recognized built-in gain of $110,000 and taxable income of $98,000.The company carries an $8,000 NOL carryforward from a C corporation year,and a $7,000 business credit carryforward from a C corporation year.The built-in gains tax liability is:

An S corporation cannot incur a tax liability at the corporation level.

All tax preference items flow through the S corporation,to be included in the shareholders' AMT calculations.

Identify a disadvantage of being an S corporation.

What statement is correct with respect to an S corporation?

The termination of an S election occurs on the day after a corporation ceases to be a qualifying S corporation.

Claude Bergeron sold 1,000 shares of Ditta,Inc. ,an S corporation,for $12,000.He had owned the stock for three years and had a stock basis of $111,000 in the shares.Claude is single,and he is the original owner of the § 1244 stock shares.Calculate the appropriate tax treatment.

When an S corporation liquidates,which of its tax attributes disappear?

If an S corporation shareholder's basis in a loan to the entity has been _________________,the shareholder recognizes gross income when the S corporation repays the shareholder.

Tax-exempt income is not separately stated on Schedule K of Form 1120S.

Distributions of appreciated property by an S corporation are not taxable to the entity.

The Section 179 expense deduction is a Schedule K item on the Form 1120S.

An Introduction to Taxation and Understanding the Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxabl

Property Transactions: Capital Gains and Losses, section 1231 and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Family Tax Planning

Income Taxation of Trusts and Estates

Filters