Question 1

The LIFO recapture tax is a variation of the passive investment income penalty tax.

Accepted Answer

A) True 
 B)False

Question 2

Which, if any, of the following is not an eligible shareholder of an S corporation?

Accepted Answer

A)  A child, age 9. 
B)  Spouse of a nonresident alien in a community property state. 
C)  A voting trust. 
D)  An estate of a deceased shareholder. 
E)  All of the above can own S corporation stock. 
A)  A child, age 9. 
B)  Spouse of a nonresident alien in a community property state. 
C)  A voting trust. 
D)  An estate of a deceased shareholder. 
E)  All of the above can own S corporation stock.

Question 3

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

Accepted Answer

A)  Charitable contributions. 
B)  Unreasonable compensation. 
C)  Payroll tax penalty assessed. 
D)  Domestic production activities deduction. 
E)  None of the above. 
A)  Charitable contributions. 
B)  Unreasonable compensation. 
C)  Payroll tax penalty assessed. 
D)  Domestic production activities deduction. 
E)  None of the above.

Question 4

Ryan is the sole shareholder of Sweetwater Apartments, an S corporation in Sour Lake, Texas. At a time when his stock basis is $10,000, the corporation distributes appreciated property worth $100,000 (basis of $10,000). There is no built-in gain. Ryan's taxable gain is:

Accepted Answer

A)  $0. 
B)  $10,000. 
C)  $90,000. 
D)  $100,000. 
E)  None of the above. 
A)  $0. 
B)  $10,000. 
C)  $90,000. 
D)  $100,000. 
E)  None of the above.

Question 5

An S shareholder's basis is increased by stock purchases and capital contributions.

Accepted Answer

A) True 
 B)False

Question 6

A voluntary revocation of an S election requires only a consent of shareholders owning a majority of shares on the day that the revocation is made.

Accepted Answer

A) True 
 B)False

Question 7

The § 1374 tax is a corporate-level tax on any built-in gain recognized in 2011 when an S corporation disposes of an asset in a taxable disposition within 7 tax years after the date on which the S election took effect.

Accepted Answer

A) True 
 B)False

Question 8

How large must total assets on Schedule L be at the end of the year for an S corporation to be required to file Schedule M-3?

Accepted Answer

A)  $4 million. 
B)  $5 million. 
C)  $7.5 million. 
D)  $10 million. 
E)  Not required to file. 
A)  $4 million. 
B)  $5 million. 
C)  $7.5 million. 
D)  $10 million. 
E)  Not required to file.

Question 9

Individuals Adam and Bonnie form an S corporation, with Adam contributing cash of $100,000 for a 50% interest and Bonnie contributing appreciated ordinary income property with an adjusted basis of $20,000 and a fair market value of $100,000.

Accepted Answer

The answer of Individuals Adam and Bonnie form an S...

Question 10

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

Accepted Answer

A)  Net sales. 
B)  Long-term capital gain. 
C)  Cost of goods sold. 
D)  Short-term capital loss. 
E)  A mortgage taken by the S corporation. 
A)  Net sales. 
B)  Long-term capital gain. 
C)  Cost of goods sold. 
D)  Short-term capital loss. 
E)  A mortgage taken by the S corporation.

Question 11

An S election allows shareholders to realize tax benefits from losses immediately.

Accepted Answer

A) True 
 B)False

Question 12

A widower and his spouse's estate are treated as one shareholder.

Accepted Answer

A) True 
 B)False

Question 13

When loss assets are distributed by an S corporation, a shareholder's basis is equal to the asset's fair market value.

Accepted Answer

A) True 
 B)False

Question 14

To make a valid S election, the entity must file a properly completed Form ____________________.

Accepted Answer

The answer of To make a valid S election, the...

Question 15

A qualifying S election requires the consent of ____________________ of the corporate shareholders.
or

Accepted Answer

The answer of A qualifying S election requires the consent...

Question 16

Claude Bergeron sold 1,000 shares of Ditta, Inc., an S corporation located in Concord, North Carolina, for $12,000. He had owned the stock for three years and had a stock basis of $111,000 in the shares. Claude is single, and he is the original owner of the § 1244 stock shares. Calculate the appropriate tax treatment of any gain or loss.

Accepted Answer

A)  No gain or loss. 
B)  $50,000 LTCL; $49,000 ordinary deduction. 
C)  $50,000 ordinary deduction; $49,000 LTCL. 
D)  $99,000 long-term capital loss. 
E)  None of the above. 
A)  No gain or loss. 
B)  $50,000 LTCL; $49,000 ordinary deduction. 
C)  $50,000 ordinary deduction; $49,000 LTCL. 
D)  $99,000 long-term capital loss. 
E)  None of the above.

Question 17

Most Roth IRAs can own S corporation stock.

Accepted Answer

A) True 
 B)False

Question 18

On January 2, 2010, David loans his S corporation $10,000, and by the end of 2010 David's stock basis is zero and the basis in his note has been reduced to $8,000. During 2011, the company's operating income is $10,000. The company also makes distributions to David of $11,000. Which statement is correct?

Accepted Answer

A)  $1,000 LTCG. 
B)  $3,000 LTCG. 
C)  $11,000 LTCG. 
D)  Loan basis is $10,000. 
E)  None of the above statements is correct. 
A)  $1,000 LTCG. 
B)  $3,000 LTCG. 
C)  $11,000 LTCG. 
D)  Loan basis is $10,000. 
E)  None of the above statements is correct.

Question 19

A capital loss allocated to a shareholder always reduces the other adjustments account.

Accepted Answer

A) True 
 B)False

Question 20

An S corporation that has total assets of at least $5 million on Schedule L at the end of the tax year must file a Schedule M-3.

Accepted Answer

A) True 
 B)False

The LIFO recapture tax is a variation of the passive investment income penalty tax.

Which, if any, of the following is not an eligible shareholder of an S corporation?

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

Ryan is the sole shareholder of Sweetwater Apartments, an S corporation in Sour Lake, Texas. At a time when his stock basis is $10,000, the corporation distributes appreciated property worth $100,000 (basis of $10,000). There is no built-in gain. Ryan's taxable gain is:

An S shareholder's basis is increased by stock purchases and capital contributions.

A voluntary revocation of an S election requires only a consent of shareholders owning a majority of shares on the day that the revocation is made.

The § 1374 tax is a corporate-level tax on any built-in gain recognized in 2011 when an S corporation disposes of an asset in a taxable disposition within 7 tax years after the date on which the S election took effect.

How large must total assets on Schedule L be at the end of the year for an S corporation to be required to file Schedule M-3?

Individuals Adam and Bonnie form an S corporation, with Adam contributing cash of $100,000 for a 50% interest and Bonnie contributing appreciated ordinary income property with an adjusted basis of $20,000 and a fair market value of $100,000.

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

An S election allows shareholders to realize tax benefits from losses immediately.

A widower and his spouse's estate are treated as one shareholder.

When loss assets are distributed by an S corporation, a shareholder's basis is equal to the asset's fair market value.

To make a valid S election, the entity must file a properly completed Form ____________________.

A qualifying S election requires the consent of ____________________ of the corporate shareholders. or

Most Roth IRAs can own S corporation stock.

A capital loss allocated to a shareholder always reduces the other adjustments account.

An S corporation that has total assets of at least $5 million on Schedule L at the end of the tax year must file a Schedule M-3.

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

The LIFO recapture tax is a variation of the passive investment income penalty tax.

Which, if any, of the following is not an eligible shareholder of an S corporation?

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

Ryan is the sole shareholder of Sweetwater Apartments, an S corporation in Sour Lake, Texas. At a time when his stock basis is $10,000, the corporation distributes appreciated property worth $100,000 (basis of $10,000). There is no built-in gain. Ryan's taxable gain is:

An S shareholder's basis is increased by stock purchases and capital contributions.

A voluntary revocation of an S election requires only a consent of shareholders owning a majority of shares on the day that the revocation is made.

The § 1374 tax is a corporate-level tax on any built-in gain recognized in 2011 when an S corporation disposes of an asset in a taxable disposition within 7 tax years after the date on which the S election took effect.

How large must total assets on Schedule L be at the end of the year for an S corporation to be required to file Schedule M-3?

Individuals Adam and Bonnie form an S corporation, with Adam contributing cash of $100,000 for a 50% interest and Bonnie contributing appreciated ordinary income property with an adjusted basis of $20,000 and a fair market value of $100,000.

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

An S election allows shareholders to realize tax benefits from losses immediately.

A widower and his spouse's estate are treated as one shareholder.

When loss assets are distributed by an S corporation, a shareholder's basis is equal to the asset's fair market value.

To make a valid S election, the entity must file a properly completed Form ____________________.

A qualifying S election requires the consent of ____________________ of the corporate shareholders. or

Most Roth IRAs can own S corporation stock.

A capital loss allocated to a shareholder always reduces the other adjustments account.

An S corporation that has total assets of at least $5 million on Schedule L at the end of the tax year must file a Schedule M-3.

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