Exam 11: US Corporations

Which one of the following is not one of the corporation-related requirements for S corporation status?

Connie's Restaurant has been an S corporation since it was formed in 2006.Its results for the previous year are as follows: What are Connie's separately stated items? What is the S corporation's ordinary income?

Which of the following statements about stock ownership is not correct?

Eagle Corporation has always been an S corporation.Eagle is 100% owned by Katy.Katy's adjusted basis in the Eagle stock is $100,000 on January 1 of the current year.During the current year,Eagle distributes XYZ stock (a capital asset)to Katy.The XYZ stock has a $50,000 FMV and a $40,000 adjusted basis on Eagle's books.The XYZ stock has been held as an investment for four years by Eagle.Eagle Corporation reports $40,000 of ordinary income in the current year.What is Katy's basis in the Eagle stock at the beginning of the next year?

Pressley Corporation was incorporated on January 1,2004.The corporation made its S election on March 1,2008.The corporation retains an E&P balance from its C corporation days.During the current year,it made a cash distribution to its sole shareholder Robert Pressley.What is the proper sequence in reducing the corporate earnings accounts for the distribution?

An S corporation is not treated as a corporate taxpayer with respect to which one of the following fringe benefits?

What is a permitted year?

Troy owns 50% of Dot.Com,an e-commerce company.His S corporation stock basis at the beginning of the year is $300,000.Dot.Com has not done well this year and will report an ordinary loss of $875,000.Troy's marginal tax rate for the current year is 35%.What tax issues should Troy consider with respect to the loss?

Swamp Corporation,a calendar-year taxpayer,has been an S corporation for several years.However,the corporation has become quite profitable,and management feels that it would be advantageous to make a public stock offering.What are Swamp Corporation's options concerning the date of revocation of the S election?

The accumulated adjustments account is the cumulative total of ordinary income or loss and separately stated items (excluding tax-exempt income and expenses)for the most recent continuous period during which the corporation has been an S corporation.

Identify which of the following statements is true.

Cactus Corporation,an S Corporation,had accumulated earnings and profits of $100,000 at the beginning of 2009.Tex and Shirley each own 50% of the stock and have a basis in their stock of $50,000 on January 1,2009.Cactus does not make any distributions during 2009,but had $200,000 of ordinary income.In 2010,ordinary income was $100,000 and distributions were $100,000.What is Tex's basis at January 1,2011?

Identify which of the following statements is true.

For an S corporation to elect to use a fiscal year other than a permitted year,the fiscal year elected must have a maximum deferral period of

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

Robert Elk paid $100,000 for all of the single class of stock of Elkom Corporation,an electing S corporation,when incorporated in January,2007.Elkom's operating results and dividend distribution are as follows: What is Elk's basis for his Elkom stock on December 31 of 2007?

Caravan Corporation has always been an S corporation.Caravan Corporation is 100%owned by Alan Merten.On January 1,Alan has an adjusted basis of $50,000 in his Caravan stock.During the year,Caravan reports ordinary income of $60,000,a long-term capital gain of $10,000,and a charitable contribution of $5,000.Alan receives a $20,000 cash distribution from Caravan on December 1.What income does Alan recognize from the distribution,and what is his basis in the Caravan stock at year-end?

An S corporation reports ordinary income of $120,000 after deducting $20,000 for Fred's salary.Fred and his three children own the S corporation equally.The IRS determines Fred's stock transfer to his three children is not bona fide.Reasonable compensation for Fred is $40,000.How much of the S corporation's $140,000 pre-salary income must be reported by Fred?

The passive income test relating to an S corporation election is applied

Gofer Corporation,an S corporation,is owned equally by Mahmoud and Kwame.The corporation had long-term capital gains of $100,000 and ordinary income of $90,000 for the current year and made no distributions.What is the amount of ordinary income from S corporation activities that Mahmoud must report?