Exam 12: S Corporations

An S corporation with substantial AEP has operating revenues of $410,000,taxable interest income of $390,000,operating expenses of $260,000,and deductions attributable to the interest of $150,000.The possible investment income penalty tax payable is:

Which corporation is eligible to make the S election?

When Gail dies,she owns 100% of the stock of an S corporation,with an adjusted basis of $10,000 and FMV of $100,000.The AB and FMV of the assets inside the S corporation are the same amounts.Gail's son Phil inherits all of the stock,but does not wish to continue the business.Therefore,the S corporation sells the assets,resulting in a $90,000 capital gain,and liquidates.Assuming that Phil is subject to a marginal tax rate of 30%,what taxes are due?

Arizona is a ________________ property state.

A distribution from previously taxed income is not taxable.

Any distribution made by an S corporation during a tax year is taken into account before accounting for the year's losses.

A shareholder has a _________________________ interest in the AAA,regardless of the size of his or her stock basis.

An estate may be a shareholder of an S corporation.

Match the term with the proper response. There may be more than one responses for each term. a.Includes gross receipts derived from royalties, passive rents, dividends, interest, etc. b.Penalty tax to stop an S corporation from avoiding the corporate tax on disposition of appreciated property. c.Cumulative total of undistributed non-separately stated items. d.Tax-free distribution. e.Generated under old S corporation rules (pre-1983). f.Items that affect basis but not AAA go here. g.Taxed as a dividend. -Built-in gain tax

Individuals Adam and Bonnie form an S corporation,with Adam contributing cash of $100,000 for a 50% interest and Bonnie contributing appreciated ordinary income property with an adjusted basis of $20,000 and a fair market value of $100,000. a.Determine Bonnie's initial basis in her stock, assuming that she receives a 50% interest. b.The S corporation sells the property for $120,000. Determine Adam's and Bonnie's stock basis after the sale. c.Determine Adam's and Bonnie's gain or loss if the company is liquidated.

Any excess of losses or deductions over both stock and debt basis is lost forever.

An S corporation in Lawrence,Kansas has a recognized built-in gain of $110,000 and taxable income of $90,000.The company has an $8,000 NOL carryforward from a C corporation year,and a $9,000 business credit carryforward from a C corporation year.The built-in gains tax liability is:

The maximum individual tax rate is ______________ (higher,lower,the same)as the corporate income rate.

NOL carryovers for C years can be used in an S corporation year.

Where the S corporation rules are silent,C corporation provisions apply.

Advise your client how income,expenses,gains and losses are allocated to shareholders.

Post-termination distributions that are charged against ____________________ do not get tax-free treatment.

Samantha owned 1,000 shares in Evita,Inc.,an S corporation,that uses the calendar year. On October 11,2008,Samantha sells all of her Evita stock. Her basis at the beginning of 2008 was $60,000. Her share of the corporate income for 2008 was $22,000,and she receives a distribution of $37,000 between January 1 and October 11. Her basis at the time of the sale is:

During 2008,Lion Corporation incurs the following transactions. Lion maintains a valid S election and does not distribute any dividends to its sole shareholder,Penny.As a result,Penny must recognize:

How may an S corporation manage its liability for the built-in gains tax?