Exam 11: US Corporations

Dilley Corporation is an electing S corporation that uses a calendar year as its tax year.On October 31,Dilley's S election is terminated because of the acquisition of stock by an ineligible stockholder.Dilley Corporation shareholder Alan is allocated an S corporation loss for the year,which cannot be used because of the basis limitation.Alan will lose the unused loss if not used by

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

Arnie is a 50% shareholder in Energy Corporation,an S corporation.The S corporation had an $80,000 ordinary loss last year and $10,000 of ordinary income this year.Before accounting for last year's losses,Arnie's basis in his Energy stock is $32,000 and Energy owed Arnie $4,000 (an unsecured note having a basis of $4,000)at the end of last year.In addition,Energy had $100,000 of other liabilities owed to creditors other than Arnie at the end of last year.What income and loss must Arnie report on his current return as a result of owning the Energy stock (ignoring the at-risk and passive activity limitations)?

Cactus Corporation,an S Corporation,had accumulated earnings and profits of $100,000 at the beginning of 2008.Tex and Shirley each own 50% of the stock.Cactus does not make any distributions during 2008,but had $200,000 of ordinary income.In 2009,ordinary income was $100,000 and distributions were $100,000.What is Tex's ordinary income for 2008?

What is a permitted year?

The Vanity Corporation organized and began operations in January.The corporation's ten equal shareholders elect to have Vanity taxed as an S corporation,and the election and necessary consents are filed in a timely manner.For its first tax year ended December 31,Vanity has ordinary income of $64,000 and short-term capital gains of $16,000.During the year,it distributes $30,000 in cash equally to its ten shareholders.For the year,how much income should each shareholder report and how should it be characterized?

Identify which of the following statements is true.

Which of the following would terminate a Subchapter S election?

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

All shareholders must consent to the revocation of S status.

Mashburn Corporation is an S corporation that uses a fiscal year ending June 30 as its tax year.When is Mashburn Corporation's income tax return due?

On June 30 of the current year,the S election of Great Corporation is terminated,thus creating a six-month S short year and a six-month C short year.Great Corporation is a calendar-year taxpayer.The S short-year return is due

Identify which of the following statements is true.

Identify which of the following statements is false.

Which of the following items is not separately stated for an S corporation?

Bellows Corporation,a calendar-year taxpayer,has been an S corporation for ten years.Last year,John sold all the Bellows stock to Micky.Payments for the stock are to be made over a five-year period.In March of next year,Micky fails to make the necessary payments and John repossesses the stock.During the time Micky holds the stock,Bellows Corporation revokes its S election.Can Bellows Corporation reelect S status?

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

Identify which of the following statements is false.

Davies Corporation is a calendar-year taxpayer that is owned equally by Vivian,Rob,Danny,and Doug Davies.At the close of business on May 31,Rob Davies sells his 25% stock interest to Paula Bryan.Which of the following statements about the S election is correct?

VJ Corporation is to be owned equally by Vic and Joe.The corporation will be formed by exchanging the assets and liabilities of the V & J Manufacturing Partnership for all the corporation's stock on September 1 of the current year.Both shareholders use the calendar year as their tax year and desire to make an S election.What tax issues should Vic and Joe consider with respect to the incorporation?