Question 1

An S shareholder's basis is not decreased by distributions treated as being paid from AAA.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

There is no limit on the amount of passive investment income that an S corporation can earn during the year.

Accepted Answer

A) True 
 B)False

Question 4

Which of these tax provisions does not apply to an S corporation?

Accepted Answer

A) Section 1244 stock. 
B) "Partial liquidation" stock redemption. 
C) Tax-free "A" reorganization. 
D) Section 1202 capital gain exclusion. 
A) Section 1244 stock. 
B) "Partial liquidation" stock redemption. 
C) Tax-free "A" reorganization. 
D) Section 1202 capital gain exclusion.

Question 5

It is not beneficial for an S corporation to issue § 1244 stock.

Accepted Answer

A) True 
 B)False

Question 6

If an S corporation shareholder's basis in a loan to the entity has been _________________, the shareholder recognizes gross income when the S corporation repays the shareholder.

Accepted Answer

The answer of If an S corporation shareholder's basis in...

Question 7

Estela, Inc., a calendar year S corporation, incurred the following items in 2012.
   Calculate Estela's nonseparately computed income.

Accepted Answer

The answer of Estela, Inc., a calendar year S corporation,...

Question 8

Which item has no effect on an S corporation's AAA?

Accepted Answer

A) Stock purchase by a shareholder. 
B) Interest expense. 
C) Cost of goods sold. 
D) Capital loss. 
E) All of the above modify AAA. 
A) Stock purchase by a shareholder. 
B) Interest expense. 
C) Cost of goods sold. 
D) Capital loss. 
E) All of the above modify AAA.

Question 9

If an S corporation excludes cancellation of debt (COD) income from gross income, the excluded amount is applied to _________________ S corporation tax attributes.

Accepted Answer

The answer of If an S corporation excludes cancellation of...

Question 10

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 11

A calendar year C corporation reports a $41,000 NOL in 2011, but it elects S status for 2012 and generates an NOL of $30,000 in that year. At all times during 2012, 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, holds an S stock basis of $2,300 at the beginning of 2012. How much of the 2012 loss, if any, is deductible by Kris?

Accepted Answer

A) $0. 
B) $2,300. 
C) $3,000. 
D) $7,100. 
A) $0. 
B) $2,300. 
C) $3,000. 
D) $7,100.

Question 12

Which statement is correct with respect to an S corporation?

Accepted Answer

A) There is no advantage to also elect § 1244 stock. 
B) An S corporation can own 85% of an insurance company. 
C) An estate may be an S shareholder. 
D) A voting trust arrangement is not available. 
E) None of the above statements is correct. 
A) There is no advantage to also elect § 1244 stock. 
B) An S corporation can own 85% of an insurance company. 
C) An estate may be an S shareholder. 
D) A voting trust arrangement is not available. 
E) None of the above statements is correct.

Question 13

An S corporation can claim a deduction for its NOL carryovers.

Accepted Answer

A) True 
 B)False

Question 14

Passive investment income includes net capital gains from the sale of stocks and securities.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

The answer of If an S corporation has C corporate...

Question 16

Four unrelated individuals acquire assets on behalf of Jump Corporation on May 21, 2012, purchased assets on June 5, 2012, and begin doing business on June 15, 2012.They subscribe to shares of stock, file articles of incorporation for Jump, and become shareholders on July 23, 2012.The S election must be filed no later than 2 1/2 months after:

Accepted Answer

A) May 21, 2012. 
B) June 5, 2012. 
C) June 15, 2012. 
D) July 23, 2012. 
E) December 31, 2012. 
A) May 21, 2012. 
B) June 5, 2012. 
C) June 15, 2012. 
D) July 23, 2012. 
E) December 31, 2012.

Question 17

The passive loss limitations apply at the S corporation shareholder level.

Accepted Answer

A) True 
 B)False

Question 18

An S election is made on the shareholder's Form 1040.

Accepted Answer

A) True 
 B)False

Question 19

An S corporation that has total assets of at least $7.5 million on Schedule L at the end of the tax year must file a Schedule M-3.

Accepted Answer

A) True 
 B)False

Question 20

Samantha owned 1,000 shares in Evita, Inc., an S corporation, that uses the calendar year. On October 11, 2012, Samantha sells all of her Evita stock. Her basis at the beginning of 2012 was $60,000. Her share of the corporate income for 2012 was $22,000, and she receives a distribution of $35,000 between January 1 and October 11, 2012. Her stock basis at the time of the sale is:

Accepted Answer

A) $117,000. 
B) $82,000. 
C) $60,000. 
D) $47,000. 
A) $117,000. 
B) $82,000. 
C) $60,000. 
D) $47,000.

Exam 22: S: Corporations

An S shareholder's basis is not decreased by distributions treated as being paid from AAA.

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

There is no limit on the amount of passive investment income that an S corporation can earn during the year.

Which of these tax provisions does not apply to an S corporation?

It is not beneficial for an S corporation to issue § 1244 stock.

If an S corporation shareholder's basis in a loan to the entity has been _________________, the shareholder recognizes gross income when the S corporation repays the shareholder.

Estela, Inc., a calendar year S corporation, incurred the following items in 2012. Calculate Estela's nonseparately computed income.

Which item has no effect on an S corporation's AAA?

If an S corporation excludes cancellation of debt (COD) income from gross income, the excluded amount is applied to _________________ S corporation tax attributes.

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.

Which statement is correct with respect to an S corporation?

An S corporation can claim a deduction for its NOL carryovers.

Passive investment income includes net capital gains from the sale of stocks and securities.

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

The passive loss limitations apply at the S corporation shareholder level.

An S election is made on the shareholder's Form 1040.

An S corporation that has total assets of at least $7.5 million on Schedule L at the end of the tax year must file a Schedule M-3.

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

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