Question 1

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  False

Question 2

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 increased to $210,000 ($120,000 + $70,000 + $20,000 + $10,000 + $6,000 - $16,000)by Rocky's current year operations.
Rocky's AAA balance before any current year distributions is $160,000 ($80,000 + $70,000 + $20,000 + $6,000 - $16,000).$80,000 {[$100,000/($100,000 + $100,000)] × $160,000 = $80,000} of each distribution comes from Rocky's AAA and is tax-free because the $160,000 amount coming from AAA is less than the $210,000 basis of the Rocky stock.
The remaining $20,000 of each distribution comes from Rocky's accumulated E&P and is a taxable dividend.This portion of the distribution does not reduce the basis of the stock.The year-end accumulated E&P is $10,000.
In addition,Rocky has a $10,000 balance in its Other Adjustments Account from the current year tax-exempt income.This amount is not a separate earnings pool for distribution purposes,but is reflected in the shareholder's stock basis.
The basis of the Rocky stock is $50,000 at year-end ($210,000 - $160,000).

Question 3

Identify which of the following statements is true.

Accepted Answer

A)  An S corporation may be subject to the corporate alternative minimum tax. 
B)  Allocation of tax preference items for AMT generally occurs on a daily basis. 
C)  An S corporation may be subject to the corporate alternative minimum tax when the corporation has accumulated E&P from prior C corporation tax years. 
D)  All of the above are false. 
A)  An S corporation may be subject to the corporate alternative minimum tax. 
B)  Allocation of tax preference items for AMT generally occurs on a daily basis. 
C)  An S corporation may be subject to the corporate alternative minimum tax when the corporation has accumulated E&P from prior C corporation tax years. 
D)  All of the above are false. B

Question 4

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.

Question 5

Swamp Corporation,a calendar-year taxpayer,has been an S corporation for several years.However,the corporation has become quite profitable,and management feels that it would be advantageous to make a public stock offering.What are Swamp Corporation's options concerning the date of revocation of the S election?

Accepted Answer

If Swamp revokes its S election before M

Question 6

Dixon Corporation was incorporated on January 1,2005.The corporation made its S election on April 1,2008.The corporation retains an E&P balance from its C corporation days.Which one of the following current-year income and expense items is not included in Dixon Corporation's Accumulated Adjustments Account?

Accepted Answer

A)  ordinary income or loss 
B)  tax-exempt bond interest income 
C)  long-term capital gains and losses 
D)  amortization of organizational expenditures 
A)  ordinary income or loss 
B)  tax-exempt bond interest income 
C)  long-term capital gains and losses 
D)  amortization of organizational expenditures

Question 7

Corporations and partnerships can be S corporation shareholders.

Accepted Answer

A) True 
 B)False

Question 8

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 9

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?

Accepted Answer

Zinc can earn an unlimited amo

Question 10

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?

Accepted Answer

• What gain or loss does Cook's Outlet r

Question 11

Cactus Corporation,an S Corporation,had accumulated earnings and profits of $100,000 at the beginning of 2011.Tex and Shirley each own 50% of the stock.Cactus does not make any distributions during 2011,but had $200,000 of ordinary income.In 2012,ordinary income was $100,000 and distributions were $100,000.What is Tex's ordinary income for 2012?

Accepted Answer

A)  $0 
B)  $50,000 
C)  $100,000 
D)  $200,000 
A)  $0 
B)  $50,000 
C)  $100,000 
D)  $200,000

Question 12

Identify which of the following statements is true.

Accepted Answer

A)  Convertible debt issues might be considered "stock" for purposes of the S corporation single class of stock requirement. 
B)  The S election must be made no later than the fifteenth day of the fourth month of the tax year for which the election is to be effective. 
C)  A majority of shareholders must consent to the S corporation election. 
D)  All of the above are false. 
A)  Convertible debt issues might be considered "stock" for purposes of the S corporation single class of stock requirement. 
B)  The S election must be made no later than the fifteenth day of the fourth month of the tax year for which the election is to be effective. 
C)  A majority of shareholders must consent to the S corporation election. 
D)  All of the above are false.

Question 13

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 14

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

Accepted Answer

A)  stock options 
B)  qualified retirement plans 
C)  group term life insurance premiums 
D)  nonqualified deferred compensation 
A)  stock options 
B)  qualified retirement plans 
C)  group term life insurance premiums 
D)  nonqualified deferred compensation

Question 15

S shareholders are allocated shares of income,gain,loss,deduction,and credit based on their number of shares of stock and period of time for which the stock is held.

Accepted Answer

A) True 
 B)False

Question 16

Up to six generations of a family are considered as one shareholder for purposes of the 100-shareholder limit.

Accepted Answer

A) True 
 B)False

Question 17

A C corporation was formed five years ago and is a fiscal-year taxpayer with a June 30 year-end.The C corporation wants to make an S election for its tax year beginning in the current year.The election must be made by ________ (assuming permission can be obtained to continue using the fiscal year from the IRS).

Accepted Answer

A)  June 30 of the current year 
B)  September 15 of the current year 
C)  June 30 of the next year 
D)  September 15 of the next year 
A)  June 30 of the current year 
B)  September 15 of the current year 
C)  June 30 of the next year 
D)  September 15 of the next year

Question 18

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?

Accepted Answer

Ordinary income is $

Question 19

Identify which of the following statements is true.

Accepted Answer

A)  Shareholders who acquire stock in an S corporation after the election date and prior to the election's effective date must consent to the election. 
B)  S corporation consent by shareholders is binding on the current tax year and all future tax years. 
C)  Only shareholders who own stock on the date an S election takes effect must consent to the election. 
D)  All of the above are false. 
A)  Shareholders who acquire stock in an S corporation after the election date and prior to the election's effective date must consent to the election. 
B)  S corporation consent by shareholders is binding on the current tax year and all future tax years. 
C)  Only shareholders who own stock on the date an S election takes effect must consent to the election. 
D)  All of the above are false.

Question 20

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...

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

Identify which of the following statements is true.

Identify which of the following statements is true.

Corporations and partnerships can be S corporation shareholders.

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

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?

Identify which of the following statements is true.

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

S shareholders are allocated shares of income,gain,loss,deduction,and credit based on their number of shares of stock and period of time for which the stock is held.

Up to six generations of a family are considered as one shareholder for purposes of the 100-shareholder limit.

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

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Exam 11: US Corporations

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

Identify which of the following statements is true.

Identify which of the following statements is true.

Corporations and partnerships can be S corporation shareholders.

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

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?

Identify which of the following statements is true.

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

S shareholders are allocated shares of income,gain,loss,deduction,and credit based on their number of shares of stock and period of time for which the stock is held.

Up to six generations of a family are considered as one shareholder for purposes of the 100-shareholder limit.

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