Question 1

Compensation for services rendered to an S corporation is subject to FICA taxes.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Which statement is correct 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)  All of the above statements are correct. 
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)  All of the above statements are correct.

Question 4

An S corporation with substantial AEP records operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000. The passive income penalty tax payable, if any, is:

Accepted Answer

A)  $0. 
B)  $40,923. 
C)  $116,923. 
D)  $136,500. 
A)  $0. 
B)  $40,923. 
C)  $116,923. 
D)  $136,500.

Question 5

An S shareholder's stock basis can be reduced below zero.

Accepted Answer

A) True 
 B)False

Question 6

An S election made before becoming a corporation is valid only beginning with the first 12-month tax year.

Accepted Answer

A) True 
 B)False

Question 7

A cash basis calendar year C corporation reports $100,000 of accounts receivable on the date of its conversion to S status on February 14. By the end of the year, $60,000 of these receivables are collected. Calculate any built-in gains tax, assuming that there is sufficient taxable income.

Accepted Answer

A)  $0 
B)  $10,000 
C)  $21,000 
D)  $35,000 
E)  Some other amount 
A)  $0 
B)  $10,000 
C)  $21,000 
D)  $35,000 
E)  Some other amount

Question 8

Liabilities affect the owner's basis differently in an S corporation than they do in a partnership.

Accepted Answer

A) True 
 B)False

Question 9

As with partnerships, the income, deductions, and tax credits of an S corporation to the shareholders annually.

Accepted Answer

The answer of As with partnerships, the income, deductions, and...

Question 10

In the case of a complete termination of an S corporation interest, a tax year may occur.

Accepted Answer

The answer of In the case of a complete termination...

Question 11

Tax-exempt income at the corporate level flows through as exempt to S shareholders.

Accepted Answer

A) True 
 B)False

Question 12

The passive investment income of an S corporation includes gains from the sale of securities.

Accepted Answer

A) True 
 B)False

Question 13

Tax-exempt income at the S corporation level flows through as taxable to the shareholder.

Accepted Answer

A) True 
 B)False

Question 14

Tax-exempt income is listed on Schedule of Form 1120S.

Accepted Answer

The answer of Tax-exempt income is listed on Schedule of...

Question 15

Fred is the sole shareholder of an S corporation in Fort Deposit, Alabama. At a time when his stock basis is $20,000, the corporation distributes appreciated property worth $100,000 (basis of $20,000). Fred's taxable gain is:

Accepted Answer

A)  $0. 
B)  $10,000. 
C)  $80,000. 
D)  $100,000. 
E)  None of the above. 
A)  $0. 
B)  $10,000. 
C)  $80,000. 
D)  $100,000. 
E)  None of the above.

Question 16

Which, if any, of the following items decreases an S corporation's AAA?

Accepted Answer

A)  Section 1231 loss. 
B)  Expenses related to tax-exempt income. 
C)  Depletion in excess of basis. 
D)  Distribution from earnings and profits. 
E)  None of the above affects the AAA. 
A)  Section 1231 loss. 
B)  Expenses related to tax-exempt income. 
C)  Depletion in excess of basis. 
D)  Distribution from earnings and profits. 
E)  None of the above affects the AAA.

Question 17

Advise your client how income, expenses, gain, and losses are allocated to shareholders of an S corporation.

Accepted Answer

In general, S corporation items are divi

Question 18

Distributions of appreciated property by an S corporation are not taxable to the entity.

Accepted Answer

A) True 
 B)False

Question 19

Which statement is incorrect with respect to the number-of-shareholders test in filing an S election?

Accepted Answer

A)  Husband Jaime and wife Maria count as one shareholder. 
B)  Grandmother Adela and granddaughter Maria count as one shareholder. 
C)  Husband Jaime and the estate of wife Maria count as one shareholder. 
D)  Husband Jaime and ex-wife Isabel count as one shareholder. 
E)  None of the above statements is incorrect. 
A)  Husband Jaime and wife Maria count as one shareholder. 
B)  Grandmother Adela and granddaughter Maria count as one shareholder. 
C)  Husband Jaime and the estate of wife Maria count as one shareholder. 
D)  Husband Jaime and ex-wife Isabel count as one shareholder. 
E)  None of the above statements is incorrect.

Question 20

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

Accepted Answer

A) True 
 B)False

Compensation for services rendered to an S corporation is subject to FICA taxes.

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

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

An S corporation with substantial AEP records operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000. The passive income penalty tax payable, if any, is:

An S shareholder's stock basis can be reduced below zero.

An S election made before becoming a corporation is valid only beginning with the first 12-month tax year.

A cash basis calendar year C corporation reports $100,000 of accounts receivable on the date of its conversion to S status on February 14. By the end of the year, $60,000 of these receivables are collected. Calculate any built-in gains tax, assuming that there is sufficient taxable income.

Liabilities affect the owner's basis differently in an S corporation than they do in a partnership.

As with partnerships, the income, deductions, and tax credits of an S corporation to the shareholders annually.

In the case of a complete termination of an S corporation interest, a tax year may occur.

Tax-exempt income at the corporate level flows through as exempt to S shareholders.

The passive investment income of an S corporation includes gains from the sale of securities.

Tax-exempt income at the S corporation level flows through as taxable to the shareholder.

Tax-exempt income is listed on Schedule of Form 1120S.

Fred is the sole shareholder of an S corporation in Fort Deposit, Alabama. At a time when his stock basis is $20,000, the corporation distributes appreciated property worth $100,000 (basis of $20,000). Fred's taxable gain is:

Which, if any, of the following items decreases an S corporation's AAA?

Advise your client how income, expenses, gain, and losses are allocated to shareholders of an S corporation.

Distributions of appreciated property by an S corporation are not taxable to the entity.

Which statement is incorrect with respect to the number-of-shareholders test in filing an S election?

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

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

Compensation for services rendered to an S corporation is subject to FICA taxes.

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

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

An S corporation with substantial AEP records operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000. The passive income penalty tax payable, if any, is:

An S shareholder's stock basis can be reduced below zero.

An S election made before becoming a corporation is valid only beginning with the first 12-month tax year.

A cash basis calendar year C corporation reports $100,000 of accounts receivable on the date of its conversion to S status on February 14. By the end of the year, $60,000 of these receivables are collected. Calculate any built-in gains tax, assuming that there is sufficient taxable income.

Liabilities affect the owner's basis differently in an S corporation than they do in a partnership.

As with partnerships, the income, deductions, and tax credits of an S corporation to the shareholders annually.

In the case of a complete termination of an S corporation interest, a tax year may occur.

Tax-exempt income at the corporate level flows through as exempt to S shareholders.

The passive investment income of an S corporation includes gains from the sale of securities.

Tax-exempt income at the S corporation level flows through as taxable to the shareholder.

Tax-exempt income is listed on Schedule of Form 1120S.

Fred is the sole shareholder of an S corporation in Fort Deposit, Alabama. At a time when his stock basis is $20,000, the corporation distributes appreciated property worth $100,000 (basis of $20,000). Fred's taxable gain is:

Which, if any, of the following items decreases an S corporation's AAA?

Advise your client how income, expenses, gain, and losses are allocated to shareholders of an S corporation.

Distributions of appreciated property by an S corporation are not taxable to the entity.

Which statement is incorrect with respect to the number-of-shareholders test in filing an S election?

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

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