Question 1

An S corporation is permitted to claim

Accepted Answer

A) the dividends-received deduction. 
B) a personal exemption. 
C) a deduction based on the amortization of organizational expenditures. 
D) a net operating loss. 
A) the dividends-received deduction. 
B) a personal exemption. 
C) a deduction based on the amortization of organizational expenditures. 
D) a net operating loss.

Question 2

An S corporation is permitted an automatic extension of time for filing its tax return.The automatic extension period is

Accepted Answer

A) one month. 
B) two months. 
C) three months. 
D) six months. 
A) one month. 
B) two months. 
C) three months. 
D) six months.

Question 3

Identify which of the following statements is true.

Accepted Answer

A) Long-term capital gains may be subject to double taxation if the gains are subject to both the excess net passive income tax rules and the built-in gains tax rules. 
B) Special allocations of ordinary income or loss and separately stated items that are available for partnerships are also permitted with S corporations. 
C) When an S corporation's shares are sold by a shareholder during a tax year,the transferee's share of the earnings is reported from the day after the transfer date through the end of the tax year. 
D) All of the above are false. 
A) Long-term capital gains may be subject to double taxation if the gains are subject to both the excess net passive income tax rules and the built-in gains tax rules. 
B) Special allocations of ordinary income or loss and separately stated items that are available for partnerships are also permitted with S corporations. 
C) When an S corporation's shares are sold by a shareholder during a tax year,the transferee's share of the earnings is reported from the day after the transfer date through the end of the tax year. 
D) All of the above are false.

Question 4

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?

Accepted Answer

Ordinary income,$6,400 (0.10 × $64,000).

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) December 31 of this year. 
B) March 15 of next year. 
C) October 31 of next year. 
D) December 31 of next year. 
A) December 31 of this year. 
B) March 15 of next year. 
C) October 31 of next year. 
D) December 31 of next year.

Question 7

King Corporation,a cash method taxpayer that uses the calendar year as its tax year,was incorporated on June 1,1984.The corporation made its initial S election on December 1 of last year,effective for the current tax year.Earnings and profits of $60,000 have been retained from C corporation tax years.Which one of the following events results in the recognition of a built-in gain?

Accepted Answer

A) collection of accounts receivable in the current year that resulted from services performed last year 
B) collection of interest income earned in the current year on bonds purchased on January 1 of last year 
C) collection of dividends declared on April 5 of the current year on stock purchased on February 14 of the current year 
D) None of the above are built-in gains. 
A) collection of accounts receivable in the current year that resulted from services performed last year 
B) collection of interest income earned in the current year on bonds purchased on January 1 of last year 
C) collection of dividends declared on April 5 of the current year on stock purchased on February 14 of the current year 
D) None of the above are built-in gains.

Question 8

Alligood Corporation has two classes of common stock outstanding.The Class A and Class B common stock give the shareholders identical rights and interests in the profits and assets of the corporation.Class A stock has one vote per share.Class B stock is nonvoting.Alligood Corporation may

Accepted Answer

A) not make the S election due to different voting rights. 
B) make the S election once the Class B is retired. 
C) make the S election at any time. 
D) not make the S election due to two classes of stock. 
A) not make the S election due to different voting rights. 
B) make the S election once the Class B is retired. 
C) make the S election at any time. 
D) not make the S election due to two classes of stock.

Question 9

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?

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 10

When a Sec.444 fiscal-year election is made,the S corporation makes required payments to the IRS in order to continue to use the fiscal year as its tax year.Which of the following statements about the tax year is correct?

Accepted Answer

A) The Sec.444 payment is deductible by the S corporation as an income tax. 
B) The Sec.444 payment is allocated ratably to each shareholder and claimed as a tax payment on their own tax return(s). 
C) The Sec.444 payments are refundable if the S election is terminated. 
D) The Sec.444 payments must be made quarterly on the same dates that the S corporation's estimated tax payments are otherwise due. 
A) The Sec.444 payment is deductible by the S corporation as an income tax. 
B) The Sec.444 payment is allocated ratably to each shareholder and claimed as a tax payment on their own tax return(s). 
C) The Sec.444 payments are refundable if the S election is terminated. 
D) The Sec.444 payments must be made quarterly on the same dates that the S corporation's estimated tax payments are otherwise due.

Question 11

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 12

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?

Accepted Answer

Yes,Bellows Corporation can im

Question 13

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

Question 14

A testamentary trust can be an S shareholder for two years,beginning on the date the stock transfers to the trust.

Accepted Answer

A) True 
 B)False

Question 15

An electing S corporation has a $30,000 ordinary loss for the non-leap year.On January 1,Beverly and Sonya own equally all of the S corporation stock.On the 146th day of the year,Beverly gives her one-half of the S corporation stock to her daughter Becky.How much of the $30,000 ordinary loss is allocated to Sonya?

Accepted Answer

A) $25,000 
B) $15,000 
C) $10,000 
D) $6,000 
A) $25,000 
B) $15,000 
C) $10,000 
D) $6,000

Question 16

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 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

Potter Corporation reports the following results for the current year:   
At the end of the year,Potter's Subchapter C E&P is $50,000.What is the amount of Potter's excess net passive income?

Accepted Answer

@#IMG-DLM& Excess ne

Question 19

Power Corporation reports the following results:   
At the end of the year,Power's Subchapter C E&P is $50,000.What is Power Corporation's excess net passive income and its excess net passive income tax for the year?

Accepted Answer

The excess net passive income

Question 20

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?

Accepted Answer

A) Paula must consent to the S election,otherwise the election terminates at the close of business on May 31. 
B) A new S election form must be filed by June 30 of the same year,with all shareholders consenting to the election.If a new S election is not filed,the election terminates on June 30 of that year. 
C) Paula has 30 days to terminate the S election,otherwise the election remains in place for the entire year and all subsequent years. 
D) None of the above statements are correct. 
A) Paula must consent to the S election,otherwise the election terminates at the close of business on May 31. 
B) A new S election form must be filed by June 30 of the same year,with all shareholders consenting to the election.If a new S election is not filed,the election terminates on June 30 of that year. 
C) Paula has 30 days to terminate the S election,otherwise the election remains in place for the entire year and all subsequent years. 
D) None of the above statements are correct.

An S corporation is permitted to claim

An S corporation is permitted an automatic extension of time for filing its tax return.The automatic extension period is

Identify which of the following statements is true.

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

Alligood Corporation has two classes of common stock outstanding.The Class A and Class B common stock give the shareholders identical rights and interests in the profits and assets of the corporation.Class A stock has one vote per share.Class B stock is nonvoting.Alligood Corporation may

When a Sec.444 fiscal-year election is made,the S corporation makes required payments to the IRS in order to continue to use the fiscal year as its tax year.Which of the following statements about the tax year is correct?

Identify which of the following statements is true.

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

A testamentary trust can be an S shareholder for two years,beginning on the date the stock transfers to the trust.

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

Potter Corporation reports the following results for the current year: At the end of the year,Potter's Subchapter C E&P is $50,000.What is the amount of Potter's excess net passive income?

Power Corporation reports the following results: At the end of the year,Power's Subchapter C E&P is $50,000.What is Power Corporation's excess net passive income and its excess net passive income tax for the year?

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?

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

An S corporation is permitted to claim

An S corporation is permitted an automatic extension of time for filing its tax return.The automatic extension period is

Identify which of the following statements is true.

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

Alligood Corporation has two classes of common stock outstanding.The Class A and Class B common stock give the shareholders identical rights and interests in the profits and assets of the corporation.Class A stock has one vote per share.Class B stock is nonvoting.Alligood Corporation may

When a Sec.444 fiscal-year election is made,the S corporation makes required payments to the IRS in order to continue to use the fiscal year as its tax year.Which of the following statements about the tax year is correct?

Identify which of the following statements is true.

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

A testamentary trust can be an S shareholder for two years,beginning on the date the stock transfers to the trust.

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

Potter Corporation reports the following results for the current year: At the end of the year,Potter's Subchapter C E&P is $50,000.What is the amount of Potter's excess net passive income?

Power Corporation reports the following results: At the end of the year,Power's Subchapter C E&P is $50,000.What is Power Corporation's excess net passive income and its excess net passive income tax for the year?

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?

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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