Question 1

An S corporation may lose its S tax status:

Accepted Answer

A) Only at the option of the IRS. 
B) If the corporation has a passive loss during the year. 
C) If any one of the shareholders dies and the estate owns the stock. 
D) If any one of the shareholders transfers some of the stock to a nonqualified trust. 
E) None of the above terminates an S election. 
A) Only at the option of the IRS. 
B) If the corporation has a passive loss during the year. 
C) If any one of the shareholders dies and the estate owns the stock. 
D) If any one of the shareholders transfers some of the stock to a nonqualified trust. 
E) None of the above terminates an S election.

Question 2

Any distribution of cash or property by a corporation with respect to the stock during a post-termination transition period of approximately one year is applied against and reduces the adjusted basis of the stock.

Accepted Answer

A) True 
 B)False

Question 3

An S corporation's AAA cannot have a negative balance.

Accepted Answer

A) True 
 B)False

Question 4

On distribution of loss property,an S corporation receives a step-down in basis.

Accepted Answer

A) True 
 B)False

Question 5

The carryover period for the NOLs of a C corporation continues to run during S corporation years.

Accepted Answer

A) True 
 B)False

Question 6

Chris,the sole shareholder of Taylor,Inc.,elects during 2008 to terminate the S election,effective January 1,2009.As of the end of 2008,Taylor,Inc.,has AAA of $120,000 and OAA of $13,000.Chris receives a cash dividend of $130,000 on January 15,2009.If his stock basis is $220,000 before the distribution,calculate Chris' taxable amount and his ending stock basis.

Accepted Answer

Cash distributions reduce the AAA ($120,

Question 7

An S election made before becoming a corporation is valid the next 12-month tax year.

Accepted Answer

A) True 
 B)False

Question 8

You are given the following facts about a 50% owner of an S corporation,and you are asked to prepare his ending stock basis.

Accepted Answer

A) $80,950. 
B) $85,750. 
C) $100,100. 
D) $106,225. 
E) Some other amount. 
A) $80,950. 
B) $85,750. 
C) $100,100. 
D) $106,225. 
E) Some other amount.

Question 9

Explain the OAA concept.

Accepted Answer

S corporations report changes in the AAA

Question 10

An S corporation does not recognize a loss when distributing assets that are worth less than their basis.

Accepted Answer

A) True 
 B)False

Question 11

For a new corporation,a premature S election may not be effective.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following items are increases on Schedule M-3 on the Form 1120S,for an S corporation with $230,000 in ordinary income?

Accepted Answer

A) An IRS agent's determination of unreasonable compensation of $43,000. 
B) Charitable contributions of $15,000. 
C) Receipt of $220,000 in tax-exempt insurance proceeds. 
D) Business gifts in excess of $25. 
E) a and d 
A) An IRS agent's determination of unreasonable compensation of $43,000. 
B) Charitable contributions of $15,000. 
C) Receipt of $220,000 in tax-exempt insurance proceeds. 
D) Business gifts in excess of $25. 
E) a and d

Question 13

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.
-PTI

Accepted Answer

The answer of Match the term with the proper response....

Question 14

Life insurance proceeds received and insurance premiums paid are traced through ____________________.

Accepted Answer

The answer of Life insurance proceeds received and insurance premiums...

Question 15

The debt basis always is adjusted back to the original amount before any increase is made in the stock basis.

Accepted Answer

A) True 
 B)False

Question 16

The pro rata method assigns an equal amount of each of the S corporation items (e.g.,LTCG)to each day of the year.

Accepted Answer

A) True 
 B)False

Question 17

AAA is the _________________________ total of undistributed non-separately and separately stated items for S corporation taxable years beginning after 1982.

Accepted Answer

The answer of AAA is the _________________________ total of undistributed...

Question 18

Post-termination distributions that are charged against OAA get tax-free treatment.

Accepted Answer

A) True 
 B)False

Question 19

Dawn Adams owns 60% of a calendar year S corporation during 2008.Her stock basis on December 31,2007 is $17,000,and her debt basis is $2,000.If the S corporation incurs a $48,000 loss for 2008,what amount may Ms.Adams deduct on her individual tax return?

Accepted Answer

Dawn Adams may deduct only $19,000 ($17,

Question 20

An S shareholder's basis includes a ratable share of any S corporation liabilities.

Accepted Answer

A) True 
 B)False

An S corporation may lose its S tax status:

Any distribution of cash or property by a corporation with respect to the stock during a post-termination transition period of approximately one year is applied against and reduces the adjusted basis of the stock.

An S corporation's AAA cannot have a negative balance.

On distribution of loss property,an S corporation receives a step-down in basis.

The carryover period for the NOLs of a C corporation continues to run during S corporation years.

An S election made before becoming a corporation is valid the next 12-month tax year.

You are given the following facts about a 50% owner of an S corporation,and you are asked to prepare his ending stock basis.

Explain the OAA concept.

An S corporation does not recognize a loss when distributing assets that are worth less than their basis.

For a new corporation,a premature S election may not be effective.

Which of the following items are increases on Schedule M-3 on the Form 1120S,for an S corporation with $230,000 in ordinary income?

Life insurance proceeds received and insurance premiums paid are traced through ____________________.

The debt basis always is adjusted back to the original amount before any increase is made in the stock basis.

The pro rata method assigns an equal amount of each of the S corporation items (e.g.,LTCG)to each day of the year.

AAA is the _________________________ total of undistributed non-separately and separately stated items for S corporation taxable years beginning after 1982.

Post-termination distributions that are charged against OAA get tax-free treatment.

Dawn Adams owns 60% of a calendar year S corporation during 2008.Her stock basis on December 31,2007 is $17,000,and her debt basis is $2,000.If the S corporation incurs a $48,000 loss for 2008,what amount may Ms.Adams deduct on her individual tax return?

An S shareholder's basis includes a ratable share of any S corporation liabilities.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, operation, and Basis

Partnerships: Distributions, transfer of Interests, and Terminations

Comparative Forms of Doing Business

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 12: S Corporations

An S corporation may lose its S tax status:

Any distribution of cash or property by a corporation with respect to the stock during a post-termination transition period of approximately one year is applied against and reduces the adjusted basis of the stock.

An S corporation's AAA cannot have a negative balance.

On distribution of loss property,an S corporation receives a step-down in basis.

The carryover period for the NOLs of a C corporation continues to run during S corporation years.

An S election made before becoming a corporation is valid the next 12-month tax year.

You are given the following facts about a 50% owner of an S corporation,and you are asked to prepare his ending stock basis.

Explain the OAA concept.

An S corporation does not recognize a loss when distributing assets that are worth less than their basis.

For a new corporation,a premature S election may not be effective.

Which of the following items are increases on Schedule M-3 on the Form 1120S,for an S corporation with $230,000 in ordinary income?

Life insurance proceeds received and insurance premiums paid are traced through ____________________.

The debt basis always is adjusted back to the original amount before any increase is made in the stock basis.

The pro rata method assigns an equal amount of each of the S corporation items (e.g.,LTCG)to each day of the year.

AAA is the _________________________ total of undistributed non-separately and separately stated items for S corporation taxable years beginning after 1982.

Post-termination distributions that are charged against OAA get tax-free treatment.

Dawn Adams owns 60% of a calendar year S corporation during 2008.Her stock basis on December 31,2007 is $17,000,and her debt basis is $2,000.If the S corporation incurs a $48,000 loss for 2008,what amount may Ms.Adams deduct on her individual tax return?

An S shareholder's basis includes a ratable share of any S corporation liabilities.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, operation, and Basis

Partnerships: Distributions, transfer of Interests, and Terminations

Comparative Forms of Doing Business

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters