Exam 12: S: Corporations

An S corporation is entitled to a deduction for its NOL carryovers.

Lott Corporation in Macon, Georgia converts to S corporation status in 2011. Lott used the LIFO inventory method in 2010 and had a LIFO inventory of $420,000 (FIFO value of $550,000). How much tax must be added to the 2010 corporate tax liability, assuming that Lott is subject to a 35% tax rate.

The § 1202 exclusion of gain is available on disposition of S corporation stock.

Post-termination distributions that are charged against OAA do not get tax-free treatment.

On December 31, 2010, Erica Sumners owns one share of an S corporation's 10 outstanding shares of stock. The basis of Erica's share is $300. During 2011, the S corporation has no income or deductions, but incurs a loss of $3,650. Determine the amount of the loss allocated to Erica, and calculate her stock basis at the end of 2011.

Compare the distribution of property rules for an S corporation with the corresponding partnership rules.

Any losses that are suspended under the at-risk rules are carried forward and are available during an S corporation's post-termination period.

Meeting the definition of a small business corporation is a ____________________ requirement for maintaining the S status.

On January 1, 2011, Zundel, Inc., an electing S corporation, has $4,000 of AEP and a balance of $10,000 in AAA. Zundel has two shareholders, Erin and Maine, each of whom owns 500 shares of Zundel's stock. Zundel's 2011 taxable income is $5,000. Zundel distributes $6,000 to each shareholder on February 1, 2011, and distributes another $3,000 to each shareholder on September 1. How is Erin taxed on this distribution?

Liabilities affect owners' basis differently between a partnership and an S corporation.

Samantha owned 1,000 shares in Evita, Inc., an S corporation, that uses the calendar year. On October 11, 2011, Samantha sells all of her Evita stock. Her basis at the beginning of 2011 was $60,000. Her share of the corporate income for 2011 was $22,000, and she receives a distribution of $37,000 between January 1 and October 11, 2011. Her stock basis at the time of the sale is:

Distribution of _________________ property by an S corporation to a shareholder generally should be avoided.

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

How may an S corporation manage its liability for the built-in gains tax?

An S corporation does not recognize a loss when distributing assets that are worth less than their basis.

Janet Wang is a 50% owner of a calendar year S corporation. During 2011, the S corporation has ordinary income of $175,000, short-term capital gain of $94,000, tax-exempt income of $22,000, and a charitable contribution of $18,000. What S corporation items must Janet report in 2011?

If an S corporation has C corporate E & P and passive income in excess of ____________________ % of its gross receipts for ____________________ consecutive taxable years, the S election is terminated at the beginning of the ____________________ year. or or

For S corporation status to apply in the current tax year, the election must be filed during the grace period before the 15th day of the third month of the current year.

Which statement is incorrect with respect to filing for an S election?

A calendar year C corporation has a $41,000 NOL in 2010, but it elects S status for 2011 and generates an NOL of $30,000 in 2011. At all times during 2011, the stock of the corporation was owned by the same 10 shareholders, each of whom owned 10% of the stock. Kris, one of the 10 shareholders, has an S stock basis of $2,300 at the beginning of 2011. How much of the loss, if any, is deductible by Kris in 2011?