Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which corporation is eligible to make the S election?

Accepted Answer

A) Foreign corporation. 
B) A one-shareholder corporation. 
C) An insurance company. 
D) A U.S.bank. 
E) None of the above can select S status. 
A) Foreign corporation. 
B) A one-shareholder corporation. 
C) An insurance company. 
D) A U.S.bank. 
E) None of the above can select S status.

Question 3

A capital loss allocated to a shareholder always reduces the Other Adjustments Account.

Accepted Answer

A) True 
 B)False

Question 4

On December 31, 2011, Erica Sumners owns one share of an S corporation's 10 outstanding shares of stock.The basis of Erica's share is $300.During 2012, 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 2012.

Accepted Answer

The loss assigned to each day of the S c

Question 5

____________________ debt in an S corporation year is not treated as a second class of stock and does not disqualify the S election.

Accepted Answer

The answer of ____________________ debt in an S corporation year...

Question 6

On January 1, 2012, 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 2012 taxable income is $5,000.Zundel distributes $6,000 to each shareholder on February 1, 2012, and distributes another $3,000 to each shareholder on September 1.How is Erin taxed on this distribution?

Accepted Answer

A) $500 dividend income. 
B) $1,000 dividend income. 
C) $1,500 dividend income. 
D) $3,000 dividend income. 
A) $500 dividend income. 
B) $1,000 dividend income. 
C) $1,500 dividend income. 
D) $3,000 dividend income.

Question 7

Only 80% of the shareholders must consent to an S election.

Accepted Answer

A) True 
 B)False

Question 8

Stock basis first is increased by income items, then ____________________ by distributions, and finally decreased by ____________________.

Accepted Answer

The answer of Stock basis first is increased by income...

Question 9

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

Accepted Answer

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

Question 10

Tax-exempt income is not separately stated on Schedule K of Form 1120S.

Accepted Answer

A) True 
 B)False

Question 11

Several individuals acquire assets on behalf of Skip Corporation on May 28, 2012, purchased assets on June 3, 2012, and began business on June 11, 2012.They subscribe to shares of stock, file articles of incorporation for Skip, and become shareholders on June 21, 2012.The S election must be filed no later than 2 1/2 months after:

Accepted Answer

A) May 28, 2012. 
B) June 3, 2012. 
C) June 11, 2012. 
D) June 21, 2012. 
E) December 31, 2012. 
A) May 28, 2012. 
B) June 3, 2012. 
C) June 11, 2012. 
D) June 21, 2012. 
E) December 31, 2012.

Question 12

An S corporation's LIFO recapture amount equals the excess of the inventory's value under ____________________ over the ____________________ value.

Accepted Answer

The answer of An S corporation's LIFO recapture amount equals...

Question 13

S corporation status combines the legal environment of ____________________ with taxation similar to that applying to ____________________.
or

Accepted Answer

C corporat

Question 14

Which statement is incorrect?

Accepted Answer

A) S corporation status allows shareholders to realize tax benefits from corporate losses immediately. 
B) Shareholder-level tax on corporate profits can be eliminated by a step-up in the basis of the stock upon a shareholder's death. 
C) Fewer than 50% of all U.S.corporations make the S election. 
D) An S corporation resembles an LLC for Federal income tax purposes. 
E) None of the above. 
A) S corporation status allows shareholders to realize tax benefits from corporate losses immediately. 
B) Shareholder-level tax on corporate profits can be eliminated by a step-up in the basis of the stock upon a shareholder's death. 
C) Fewer than 50% of all U.S.corporations make the S election. 
D) An S corporation resembles an LLC for Federal income tax purposes. 
E) None of the above.

Question 15

Depletion in excess of basis in property causes a(n) ____________________ adjustment to an S shareholder's basis.
or

Accepted Answer

The answer of Depletion in excess of basis in property...

Question 16

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 17

Mock Corporation converts to S corporation status in 2012.Mock used the LIFO inventory method in 2011 and had a LIFO inventory of $435,000 (FIFO value of $550,000) on the date of the S election.How much tax must be added to the 2011 corporate tax liability, assuming that Mock is subject to a 35% tax rate.

Accepted Answer

A) $0. 
B) $10,062.50. 
C) $40,250. 
D) $115,000. 
A) $0. 
B) $10,062.50. 
C) $40,250. 
D) $115,000.

Question 18

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) $1 million. 
B) $5 million. 
C) $10 million. 
D) $100 million. 
A) $1 million. 
B) $5 million. 
C) $10 million. 
D) $100 million.

Question 19

An S shareholder who dies during the corporate tax year must report his or her share of the pro rata income (or loss) up to the date of death on the final individual tax return.

Accepted Answer

A) True 
 B)False

Question 20

An S shareholder's basis in his or her stock can be reduced below zero.

Accepted Answer

A) True 
 B)False

Exam 22: S: Corporations

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

Which corporation is eligible to make the S election?

A capital loss allocated to a shareholder always reduces the Other Adjustments Account.

____________________ debt in an S corporation year is not treated as a second class of stock and does not disqualify the S election.

Only 80% of the shareholders must consent to an S election.

Stock basis first is increased by income items, then ____________________ by distributions, and finally decreased by ____________________.

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

Tax-exempt income is not separately stated on Schedule K of Form 1120S.

An S corporation's LIFO recapture amount equals the excess of the inventory's value under ____________________ over the ____________________ value.

S corporation status combines the legal environment of ____________________ with taxation similar to that applying to ____________________. or

Which statement is incorrect?

Depletion in excess of basis in property causes a(n) ____________________ adjustment to an S shareholder's basis. or

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

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?

An S shareholder who dies during the corporate tax year must report his or her share of the pro rata income (or loss) up to the date of death on the final individual tax return.

An S shareholder's basis in his or her stock can be reduced below zero.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

A: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Income Taxation of Trusts and Estates

Filters

Stock basis first is increased by income items, then by distributions, and finally decreased by .

An S corporation's LIFO recapture amount equals the excess of the inventory's value under over the value.

S corporation status combines the legal environment of with taxation similar to that applying to . or