Question 1

An S corporation may be subject to the following tax:

Accepted Answer

A)  Corporation income tax (§ 11). 
B)  Passive investment income tax. 
C)  Alternative minimum tax. 
D)  None of the above applies to S corporations. 
A)  Corporation income tax (§ 11). 
B)  Passive investment income tax. 
C)  Alternative minimum tax. 
D)  None of the above applies to S corporations.

Question 2

A limited liability company can make an S election.

Accepted Answer

A) True 
 B)False

Question 3

A limited liability company can own S corporation stock.

Accepted Answer

A) True 
 B)False

Question 4

Which statement is incorrect with respect to an S shareholder's consent?

Accepted Answer

A)  An S election requires a consent from all of the S corporation's shareholders. 
B)  Both husband and wife must consent if one owns the stock as community property. 
C)  A consent extension is available only if Form 2553 is filed on a timely basis, reasonable cause is given, and the interests of the government are not jeopardized. 
D)  A consent must be in writing. 
E)  None of the above statements is incorrect. 
A)  An S election requires a consent from all of the S corporation's shareholders. 
B)  Both husband and wife must consent if one owns the stock as community property. 
C)  A consent extension is available only if Form 2553 is filed on a timely basis, reasonable cause is given, and the interests of the government are not jeopardized. 
D)  A consent must be in writing. 
E)  None of the above statements is incorrect.

Question 5

A distribution of cash or other property by an S corporation to shareholders that does not exceed the balance of AAA during a one-year period following an S election termination receives special capital gain treatment.

Accepted Answer

A) True 
 B)False

Question 6

An S corporation's separately stated items generally are identical to those separately stated by _________________________.

Accepted Answer

The answer of An S corporation's separately stated items generally...

Question 7

Which statement is true?

Accepted Answer

A)  Charitable contributions are subject to the 10% limitation at the corporate level. 
B)  The at-risk rules apply to S corporations. 
C)  The passive loss limitations do not apply to S corporations. 
D)  S corporations are exempted from state and local taxes. 
E)  None of the above. 
A)  Charitable contributions are subject to the 10% limitation at the corporate level. 
B)  The at-risk rules apply to S corporations. 
C)  The passive loss limitations do not apply to S corporations. 
D)  S corporations are exempted from state and local taxes. 
E)  None of the above.

Question 8

Randall owns 800 shares in Fabrication, Inc., an S corporation in Moss Hill, Texas. In 2011, his basis in his stock is $30,000, before the adjustment for this year's losses. During 2011, Randall's share of the corporation's ordinary loss is $20,000 and his share of its capital loss is $15,000. How much can Randall deduct due to these losses?

Accepted Answer

A)  None. 
B)  $15,000 ordinary loss; $10,000 capital loss. 
C)  $17,143 ordinary loss; $12,857 capital loss. 
D)  $20,000 ordinary loss; $15,000 capital loss. 
E)  Some other amounts. 
A)  None. 
B)  $15,000 ordinary loss; $10,000 capital loss. 
C)  $17,143 ordinary loss; $12,857 capital loss. 
D)  $20,000 ordinary loss; $15,000 capital loss. 
E)  Some other amounts.

Question 9

Which type of distribution from an S corporation is taxed at the 0/15% Federal income tax rate?

Accepted Answer

A)  AAA. 
B)  Nonseparately computed income. 
C)  OAA. 
D)  AEP. 
E)  None of the above. 
A)  AAA. 
B)  Nonseparately computed income. 
C)  OAA. 
D)  AEP. 
E)  None of the above.

Question 10

Identify a disadvantage of S corporation status.

Accepted Answer

A)  Most trusts can be shareholders. 
B)  Losses flow through to the shareholders. 
C)  The ACE adjustment is avoided. 
D)  Tax-exempt income flows through to the shareholders. 
E)  None of the above is a disadvantage of the S election. 
A)  Most trusts can be shareholders. 
B)  Losses flow through to the shareholders. 
C)  The ACE adjustment is avoided. 
D)  Tax-exempt income flows through to the shareholders. 
E)  None of the above is a disadvantage of the S election.

Question 11

A per-day, per-share allocation of flow-through S corporation items must be used, unless the shareholder disposes of the entire interest in the entity.

Accepted Answer

A) True 
 B)False

Question 12

Differences in distribution or liquidation rights among shareholders do not create a second class of stock.

Accepted Answer

A) True 
 B)False

Question 13

Pepper, Inc., an S corporation in Norfolk, VA, generates revenues of $400,000, taxable interest of $380,000, operating expenses of $250,000, and deductions attributable to the interest income of $140,000. Calculate any passive investment income penalty tax payable by Pepper.

Accepted Answer

Pepper pays a § 1375

Question 14

Form 1120S provides a shareholder's computation of his or her stock basis.

Accepted Answer

A) True 
 B)False

Question 15

A maximum dollar sales limitation applies to an S corporation.

Accepted Answer

A) True 
 B)False

Question 16

The alternative minimum tax does not apply to an S corporation.

Accepted Answer

A) True 
 B)False

Question 17

During 2011, Ms. Rasic, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2010, Ms. Rasic's stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. Calculate the amount and type of income Ms. Rasic recognizes in 2011, assuming there is no C corporation AEP.

Accepted Answer

$11,000 ordinary income; $15,000 return

Question 18

Which statement is false?

Accepted Answer

A)  Partnership taxation rules do not apply to S corporations. 
B)  A two-or-more member LLC operates under partnership principles. 
C)  All income of an S corporation flows through to the S shareholders. 
D)  S shareholders may use their proportionate shares of NOLs currently. 
E)  None of the above. 
A)  Partnership taxation rules do not apply to S corporations. 
B)  A two-or-more member LLC operates under partnership principles. 
C)  All income of an S corporation flows through to the S shareholders. 
D)  S shareholders may use their proportionate shares of NOLs currently. 
E)  None of the above.

Question 19

Blue Corporation elects S status effective for tax year 2011. As of January 1, 2011, Blue's assets were appraised as follows.
   In each of the following situations, calculate any built-in gains tax, assuming that the highest corporate tax rate is 35%. C corporation taxable income would have been $100,000.

Accepted Answer

The answer of Blue Corporation elects S status effective for...

Question 20

In the case of a complete termination of an S corporation interest, a ____________________ tax year may occur.

Accepted Answer

The answer of In the case of a complete termination...

An S corporation may be subject to the following tax:

A limited liability company can make an S election.

A limited liability company can own S corporation stock.

Which statement is incorrect with respect to an S shareholder's consent?

A distribution of cash or other property by an S corporation to shareholders that does not exceed the balance of AAA during a one-year period following an S election termination receives special capital gain treatment.

An S corporation's separately stated items generally are identical to those separately stated by _________________________.

Which statement is true?

Which type of distribution from an S corporation is taxed at the 0/15% Federal income tax rate?

Identify a disadvantage of S corporation status.

A per-day, per-share allocation of flow-through S corporation items must be used, unless the shareholder disposes of the entire interest in the entity.

Differences in distribution or liquidation rights among shareholders do not create a second class of stock.

Pepper, Inc., an S corporation in Norfolk, VA, generates revenues of $400,000, taxable interest of $380,000, operating expenses of $250,000, and deductions attributable to the interest income of $140,000. Calculate any passive investment income penalty tax payable by Pepper.

Form 1120S provides a shareholder's computation of his or her stock basis.

A maximum dollar sales limitation applies to an S corporation.

The alternative minimum tax does not apply to an S corporation.

Which statement is false?

In the case of a complete termination of an S corporation interest, a ____________________ tax year may occur.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings 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

Taxes on the Financial Statements

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 be subject to the following tax:

A limited liability company can make an S election.

A limited liability company can own S corporation stock.

Which statement is incorrect with respect to an S shareholder's consent?

A distribution of cash or other property by an S corporation to shareholders that does not exceed the balance of AAA during a one-year period following an S election termination receives special capital gain treatment.

An S corporation's separately stated items generally are identical to those separately stated by _________________________.

Which statement is true?

Which type of distribution from an S corporation is taxed at the 0/15% Federal income tax rate?

Identify a disadvantage of S corporation status.

A per-day, per-share allocation of flow-through S corporation items must be used, unless the shareholder disposes of the entire interest in the entity.

Differences in distribution or liquidation rights among shareholders do not create a second class of stock.

Pepper, Inc., an S corporation in Norfolk, VA, generates revenues of $400,000, taxable interest of $380,000, operating expenses of $250,000, and deductions attributable to the interest income of $140,000. Calculate any passive investment income penalty tax payable by Pepper.

Form 1120S provides a shareholder's computation of his or her stock basis.

A maximum dollar sales limitation applies to an S corporation.

The alternative minimum tax does not apply to an S corporation.

Which statement is false?

In the case of a complete termination of an S corporation interest, a ____________________ tax year may occur.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings 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

Taxes on the Financial Statements

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