Question 1

An S corporation may not amortize its organization expenses.

Accepted Answer

A) True 
 B)False

Question 2

Realized gain is recognized by an S corporation on its distribution of property.

Accepted Answer

The answer of Realized gain is recognized by an S...

Question 3

Any distribution made by an S corporation during a tax year is taken into account before accounting for the year's losses.

Accepted Answer

A) True 
 B)False

Question 4

Passive investment income (for passive investment income penalty tax)

Accepted Answer

The answer of Passive investment income (for passive investment income...

Question 5

The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

Accepted Answer

A) True 
 B)False

Question 6

What statement is correct with respect to an S corporation?

Accepted Answer

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

Question 7

What method is used to allocate S corporation income or losses (unless an election to the contrary is made)?

Accepted Answer

A)  Any method agreed to by all of the shareholders. 
B)  Per-day allocation. 
C)  FIFO method. 
D)  LIFO method. 
E)  Some other method. 
A)  Any method agreed to by all of the shareholders. 
B)  Per-day allocation. 
C)  FIFO method. 
D)  LIFO method. 
E)  Some other method.

Question 8

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 9

Estela, Inc., a calendar year S corporation, incurred the following items in 2014.
   Calculate Estela's nonseparately computed income.

Accepted Answer

Sales $120,000
Depreciation recapture in

Question 10

Samantha owned 1,000 shares in Evita, Inc., an S corporation, that uses the calendar year. On October 11, 2014, Samantha sells all of her Evita stock. Her basis at the beginning of 2014 was $60,000. Her share of the corporate income for 2014 was $22,000, and she receives a distribution of $35,000 between January 1 and October 11, 2014. 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.

Question 11

An S election is made on the shareholder's Form 2553.

Accepted Answer

A) True 
 B)False

Question 12

When an S corporation liquidates, which of its tax attributes disappear?

Accepted Answer

A)  AAA. 
B)  AEP. 
C)  Suspended losses. 
D)  All of the above items disappear. 
A)  AAA. 
B)  AEP. 
C)  Suspended losses. 
D)  All of the above items disappear.

Question 13

If any entity electing S status is currently a C corporation, NOL carryovers from prior years
be used in an S corporation year.

Accepted Answer

The answer of If any entity electing S status is...

Question 14

The maximum number of actual shareholders in an S corporation is:

Accepted Answer

A)  75. 
B)  Some other number. 
C)  100. 
D)  Indeterminable. 
E)  200. 
A)  75. 
B)  Some other number. 
C)  100. 
D)  Indeterminable. 
E)  200.

Question 15

Which, if any, of the following can be eligible shareholders of an S corporation?

Accepted Answer

A)  A Roth IRA. 
B)  Partnership. 
C)  A non-U.S. corporation. 
D)  A nonqualifying trust. 
E)  None of the above can own stock. 
A)  A Roth IRA. 
B)  Partnership. 
C)  A non-U.S. corporation. 
D)  A nonqualifying trust. 
E)  None of the above can own stock.

Question 16

Mock Corporation converts to S corporation status in 2014. Mock used the LIFO inventory method in 2013 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 Mock's 2013 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 
E)  Some other amount 
A)  $0 
B)  $10,062.50 
C)  $40,250 
D)  $115,000 
E)  Some other amount

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

An S shareholder's stock basis is reduced by flow­through losses before accounting for distributions.

Accepted Answer

A) True 
 B)False

Question 19

If an S corporation's beginning balance in OAA is zero, and the following transactions occur, what is the ending OAA balance?

Accepted Answer

The answer of If an S corporation's beginning balance in...

Question 20

Which statement is incorrect with respect to an S shareholder's consent?

Accepted Answer

A)  A consent extension is available only if Form 2553 is filed on a timely basis, reasonable cause is given, and the interests of the government are not jeopardized. 
B)  Both husband and wife must consent if one owns the stock as community property. 
C)  An S election requires a consent from all of the S corporation's shareholders. 
D)  A consent must be in writing. 
E)  None of the above statements is incorrect. 
A)  A consent extension is available only if Form 2553 is filed on a timely basis, reasonable cause is given, and the interests of the government are not jeopardized. 
B)  Both husband and wife must consent if one owns the stock as community property. 
C)  An S election requires a consent from all of the S corporation's shareholders. 
D)  A consent must be in writing. 
E)  None of the above statements is incorrect.

An S corporation may not amortize its organization expenses.

Realized gain is recognized by an S corporation on its distribution of property.

Any distribution made by an S corporation during a tax year is taken into account before accounting for the year's losses.

Passive investment income (for passive investment income penalty tax)

The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

What statement is correct with respect to an S corporation?

What method is used to allocate S corporation income or losses (unless an election to the contrary is made)?

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

Estela, Inc., a calendar year S corporation, incurred the following items in 2014. Calculate Estela's nonseparately computed income.

An S election is made on the shareholder's Form 2553.

When an S corporation liquidates, which of its tax attributes disappear?

If any entity electing S status is currently a C corporation, NOL carryovers from prior years be used in an S corporation year.

The maximum number of actual shareholders in an S corporation is:

Which, if any, of the following can be eligible shareholders of an S corporation?

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

An S shareholder's stock basis is reduced by flowthrough losses before accounting for distributions.

If an S corporation's beginning balance in OAA is zero, and the following transactions occur, what is the ending OAA balance?

Which statement is incorrect with respect to an S shareholder's consent?

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

An S corporation may not amortize its organization expenses.

Realized gain is recognized by an S corporation on its distribution of property.

Any distribution made by an S corporation during a tax year is taken into account before accounting for the year's losses.

Passive investment income (for passive investment income penalty tax)

The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

What statement is correct with respect to an S corporation?

What method is used to allocate S corporation income or losses (unless an election to the contrary is made)?

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

Estela, Inc., a calendar year S corporation, incurred the following items in 2014. Calculate Estela's nonseparately computed income.

An S election is made on the shareholder's Form 2553.

When an S corporation liquidates, which of its tax attributes disappear?

If any entity electing S status is currently a C corporation, NOL carryovers from prior years be used in an S corporation year.

The maximum number of actual shareholders in an S corporation is:

Which, if any, of the following can be eligible shareholders of an S corporation?

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

An S shareholder's stock basis is reduced by flow­through losses before accounting for distributions.

If an S corporation's beginning balance in OAA is zero, and the following transactions occur, what is the ending OAA balance?

Which statement is incorrect with respect to an S shareholder's consent?

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

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

An S shareholder's stock basis is reduced by flowthrough losses before accounting for distributions.