Question 1

A new S corporation shareholder can revoke the S election unilaterally, if he/she owns how much of the existing S corporation's stock?

Accepted Answer

A) More than 50%. 
B) 50% or more. 
C) The election can be revoked only if all of the shareholders consent. 
D) The election cannot be revoked during the first year of the new shareholder's ownership. 
A) More than 50%. 
B) 50% or more. 
C) The election can be revoked only if all of the shareholders consent. 
D) The election cannot be revoked during the first year of the new shareholder's ownership.

Question 2

Which item does not appear on Schedule K of Form 1120S?

Accepted Answer

A) Intangible drilling costs. 
B) Foreign loss. 
C) Utilities expense. 
D) Recovery of a tax benefit. 
E) All of the above items appear on Schedule K. 
A) Intangible drilling costs. 
B) Foreign loss. 
C) Utilities expense. 
D) Recovery of a tax benefit. 
E) All of the above items appear on Schedule K.

Question 3

An item that appears in the "Other Adjustments Account" affects stock basis, but not AAA, such as tax-exempt interest.

Accepted Answer

A) True 
 B)False

Question 4

You are a 60% owner of an S corporation. Calculate your ending stock basis, based upon these facts.

Accepted Answer

$52,600 + $15,000 +.

Question 5

Distribution of appreciated property is taxable to an S corporation.

Accepted Answer

A) True 
 B)False

Question 6

Shareholders may deduct losses in excess of their basis in S corporation stock when a shareholder holds a loan basis of zero.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Pass-through S corporation losses can reduce the basis in the shareholder's loan to the entity, but distributions do not.

Accepted Answer

A) True 
 B)False

Question 9

Any excess of S corporation losses or deductions over the shareholder's combined stock and debt basis is suspended until there is a subsequent stock or debt basis.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

During 2012, Rasic, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2011, Rasic's stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. Calculate the amount and type of income that Rasic recognizes in 2012, assuming that there is no C corporation AEP.

Accepted Answer

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

Question 12

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

Accepted Answer

A taxable income limitation encourages a

Question 13

As a general rule, S corporation treatment is not advantageous when the individual tax rate far exceeds the applicable corporate tax rate.

Accepted Answer

A) True 
 B)False

Question 14

Where the S corporation rules are silent, partnership rules apply to the S corporation.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) Form 2553 must be filed. 
B) All shareholders must consent. 
C) The election may be filed in the previous year. 
D) An extension of time is available for filing Form 2553. 
E) None of the above statements is incorrect. 
A) Form 2553 must be filed. 
B) All shareholders must consent. 
C) The election may be filed in the previous year. 
D) An extension of time is available for filing Form 2553. 
E) None of the above statements is incorrect.

Question 16

An S shareholder's stock basis includes a ratable share of any S corporation liabilities.

Accepted Answer

A) True 
 B)False

Question 17

Randall owns 800 shares in Fabrication, Inc., an S corporation in Moss Hill, Texas.In 2012, his basis in his stock is $30,000, before the adjustment for this year's losses.During 2012, 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) No deduction. 
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. 
A) No deduction. 
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.

Question 18

For a new corporation, a premature S election may not be effective.

Accepted Answer

A) True 
 B)False

Question 19

Non-separately computed loss ____________________ a S shareholder's stock basis.

Accepted Answer

The answer of Non-separately computed loss ____________________ a S shareholder's...

Question 20

Which item is not included in an S corporation's nonseparately computed income?

Accepted Answer

A) Net sales. 
B) Cost of goods sold. 
C) Dividends received. 
D) Depreciation recapture. 
A) Net sales. 
B) Cost of goods sold. 
C) Dividends received. 
D) Depreciation recapture.

Exam 22: S: Corporations

A new S corporation shareholder can revoke the S election unilaterally, if he/she owns how much of the existing S corporation's stock?

Which item does not appear on Schedule K of Form 1120S?

An item that appears in the "Other Adjustments Account" affects stock basis, but not AAA, such as tax-exempt interest.

You are a 60% owner of an S corporation. Calculate your ending stock basis, based upon these facts.

Distribution of appreciated property is taxable to an S corporation.

Shareholders may deduct losses in excess of their basis in S corporation stock when a shareholder holds a loan basis of zero.

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

Pass-through S corporation losses can reduce the basis in the shareholder's loan to the entity, but distributions do not.

Any excess of S corporation losses or deductions over the shareholder's combined stock and debt basis is suspended until there is a subsequent stock or debt basis.

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

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

As a general rule, S corporation treatment is not advantageous when the individual tax rate far exceeds the applicable corporate tax rate.

Where the S corporation rules are silent, partnership rules apply to the S corporation.

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

An S shareholder's stock basis includes a ratable share of any S corporation liabilities.

For a new corporation, a premature S election may not be effective.

Non-separately computed loss ____________________ a S shareholder's stock basis.

Which item is not included in an S corporation's nonseparately computed income?

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