Question 1

What statement is correct with respect to an S corporation?

Accepted Answer

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

Question 2

Estela,Inc.,a calendar year S corporation,incurred the following items in 2008.
   
Calculate Estela's nonseparately computed income.

Accepted Answer

The answer of Estela,Inc.,a calendar year S corporation,incurred the following...

Question 3

Excess net passive income of an S corporation is $40,000 and taxable income is $32,000.Assuming that there is $50,000 of accumulated earnings and profits from a C corporation year,calculate any passive income penalty tax.

Accepted Answer

A) $0. 
B) $4,500. 
C) $10,500. 
D) $11,200. 
E) Some other amount. 
A) $0. 
B) $4,500. 
C) $10,500. 
D) $11,200. 
E) Some other amount.

Question 4

Pepper,Inc.,an S corporation in Norfolk,Virginia,has revenues of $400,000,taxable interest of $380,000,operating expenses of $250,000,and deductions attributable to the interest income of $140,000.What is Pepper's § 1375 penalty tax payable?

Accepted Answer

A) $0. 
B) $40,895. 
C) $185,000. 
D) $380,000. 
E) Some other amount. 
A) $0. 
B) $40,895. 
C) $185,000. 
D) $380,000. 
E) Some other amount.

Question 5

_________________ taxation rules do not apply to an S corporation.

Accepted Answer

The answer of _________________ taxation rules do not apply to...

Question 6

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2?

Accepted Answer

A) Taxable dividends. 
B) Stock dividend (taxable). 
C) Section 1250 gain. 
D) Tax-exempt income. 
E) None of the above. 
A) Taxable dividends. 
B) Stock dividend (taxable). 
C) Section 1250 gain. 
D) Tax-exempt income. 
E) None of the above.

Question 7

Since only ____________________ distributions reduce AAA during the post-election termination period,a corporation should not make ____________________ distributions during this time.

Accepted Answer

The answer of Since only ____________________ distributions reduce AAA during...

Question 8

An S election is made on Form 2550.

Accepted Answer

A) True 
 B)False

Question 9

In certain circumstances,an S shareholder's basis in her S stock can be reduced below zero.

Accepted Answer

A) True 
 B)False

Question 10

S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).

Accepted Answer

A) True 
 B)False

Question 11

Tax-exempt income at the S level loses its special tax treatment for the shareholder.

Accepted Answer

A) True 
 B)False

Question 12

Which,if any,of the following items has no effect on the stock basis of an S corporation shareholder?

Accepted Answer

A) Operating income. 
B) Long-term capital gain. 
C) Cost of goods sold. 
D) Short-term capital loss. 
E) All of the above affect stock basis. 
A) Operating income. 
B) Long-term capital gain. 
C) Cost of goods sold. 
D) Short-term capital loss. 
E) All of the above affect stock basis.

Question 13

Since loss property receives a ____________________ - ____________________ in basis without any loss recognition,distributions of loss property should be ____________________.

Accepted Answer

The answer of Since loss property receives a ____________________ -...

Question 14

If a resident alien shareholder moves outside the U.S.,the S election is terminated.

Accepted Answer

A) True 
 B)False

Question 15

An S corporation in Polly Beach,South Carolina,reports a recognized built-in gain of $95,000 and taxable income of $80,000.It holds a $7,000 NOL carryforward and a $9,000 business credit carryforward from a C corporation year.There are no earnings and profits from C corporation years.The built-in gains tax liability is:

Accepted Answer

A) $0. 
B) $16,550. 
C) $25,550. 
D) $28,000. 
E) None of the above. 
A) $0. 
B) $16,550. 
C) $25,550. 
D) $28,000. 
E) None of the above.

Question 16

On January 1,2008,Kinney,Inc.,an electing S corporation,has $4,000 of AEP and a balance of $10,000 in AAA.Kinney has two shareholders,Erin and Maine,each of whom owns 500 shares of Kinney's stock.Kinney's 2008 taxable income is $5,000.Kinney distributes $6,000 to each shareholder on February 1,2008,and distributes another $3,000 to each shareholder on September 1.How is Erin taxed on this distribution?

Accepted Answer

A) $500 dividend income. 
B) $1,000 dividend income. 
C) $1,500 dividend income. 
D) $3,000 dividend income. 
E) None of the above. 
A) $500 dividend income. 
B) $1,000 dividend income. 
C) $1,500 dividend income. 
D) $3,000 dividend income. 
E) None of the above.

Question 17

Liabilities affect the owner's basis differently in an S corporation versus a partnership.

Accepted Answer

A) True 
 B)False

Question 18

Distributions are made from OAA after AEP and AAA reach zero.

Accepted Answer

A) True 
 B)False

Question 19

Payment of an illegal kickback would increase a shareholder's stock basis.

Accepted Answer

A) True 
 B)False

Question 20

If shareholders have high marginal rates relative to C corporation rates,it may be desirable to ________________ S corporation status.

Accepted Answer

The answer of If shareholders have high marginal rates relative...

What statement is correct with respect to an S corporation?

Estela,Inc.,a calendar year S corporation,incurred the following items in 2008. Calculate Estela's nonseparately computed income.

Excess net passive income of an S corporation is $40,000 and taxable income is $32,000.Assuming that there is $50,000 of accumulated earnings and profits from a C corporation year,calculate any passive income penalty tax.

Pepper,Inc.,an S corporation in Norfolk,Virginia,has revenues of $400,000,taxable interest of $380,000,operating expenses of $250,000,and deductions attributable to the interest income of $140,000.What is Pepper's § 1375 penalty tax payable?

_________________ taxation rules do not apply to an S corporation.

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2?

Since only distributions reduce AAA during the post-election termination period,a corporation should not make distributions during this time.

An S election is made on Form 2550.

In certain circumstances,an S shareholder's basis in her S stock can be reduced below zero.

S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).

Tax-exempt income at the S level loses its special tax treatment for the shareholder.

Which,if any,of the following items has no effect on the stock basis of an S corporation shareholder?

Since loss property receives a - in basis without any loss recognition,distributions of loss property should be .

If a resident alien shareholder moves outside the U.S.,the S election is terminated.

Liabilities affect the owner's basis differently in an S corporation versus a partnership.

Distributions are made from OAA after AEP and AAA reach zero.

Payment of an illegal kickback would increase a shareholder's stock basis.

If shareholders have high marginal rates relative to C corporation rates,it may be desirable to ________________ S corporation status.

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

What statement is correct with respect to an S corporation?

Estela,Inc.,a calendar year S corporation,incurred the following items in 2008. Calculate Estela's nonseparately computed income.

Excess net passive income of an S corporation is $40,000 and taxable income is $32,000.Assuming that there is $50,000 of accumulated earnings and profits from a C corporation year,calculate any passive income penalty tax.

Pepper,Inc.,an S corporation in Norfolk,Virginia,has revenues of $400,000,taxable interest of $380,000,operating expenses of $250,000,and deductions attributable to the interest income of $140,000.What is Pepper's § 1375 penalty tax payable?

_________________ taxation rules do not apply to an S corporation.

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2?

Since only ____________________ distributions reduce AAA during the post-election termination period,a corporation should not make ____________________ distributions during this time.

An S election is made on Form 2550.

In certain circumstances,an S shareholder's basis in her S stock can be reduced below zero.

S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).

Tax-exempt income at the S level loses its special tax treatment for the shareholder.

Which,if any,of the following items has no effect on the stock basis of an S corporation shareholder?

Since loss property receives a ____________________ - ____________________ in basis without any loss recognition,distributions of loss property should be ____________________.

If a resident alien shareholder moves outside the U.S.,the S election is terminated.

Liabilities affect the owner's basis differently in an S corporation versus a partnership.

Distributions are made from OAA after AEP and AAA reach zero.

Payment of an illegal kickback would increase a shareholder's stock basis.

If shareholders have high marginal rates relative to C corporation rates,it may be desirable to ________________ S corporation status.

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

Since only distributions reduce AAA during the post-election termination period,a corporation should not make distributions during this time.

Since loss property receives a - in basis without any loss recognition,distributions of loss property should be .