Question 1

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M­2?

Accepted Answer

A)  Payroll penalty. 
B)  Unreasonable compensation. 
C)  Life insurance proceeds (nontaxable to the recipient S corporation). 
D)  Taxable interest. 
E)  None of the above affects the OAA. 
A)  Payroll penalty. 
B)  Unreasonable compensation. 
C)  Life insurance proceeds (nontaxable to the recipient S corporation). 
D)  Taxable interest. 
E)  None of the above affects the OAA.

Question 2

Four unrelated individuals acquire assets on behalf of Jump Corporation on May 21, 2014, purchased assets on June 5, 2014, and begin doing business on June 15, 2014. They subscribe to shares of stock, file articles of incorporation for Jump, and become shareholders on July 23, 2014. The S election must be filed no later than 2 1/2 months after:

Accepted Answer

A)  May 21, 2014. 
B)  June 5, 2014. 
C)  June 15, 2014. 
D)  July 23, 2014. 
E)  December 31, 2014. 
A)  May 21, 2014. 
B)  June 5, 2014. 
C)  June 15, 2014. 
D)  July 23, 2014. 
E)  December 31, 2014.

Question 3

An S corporation that has total assets of at least $10 million on Schedule L at the end of the tax year must file a Schedule M-3.

Accepted Answer

A) True 
 B)False

Question 4

The § 1202 exclusion of on the disposition of small business stock (is/is not)
available for S stock.

Accepted Answer

The answer of The § 1202 exclusion of on the...

Question 5

Explain the OAA concept.

Accepted Answer

S corporations report changes in the AAA

Question 6

Since loss property receives a in basis without any loss recognition, S corporation distributions of loss property should be .

Accepted Answer

The answer of Since loss property receives a in basis...

Question 7

On January 2, 2013, David loans his S corporation $10,000. By the end of 2013 David's stock basis is zero and the basis in his note has been reduced to $8,000. During 2014, the company's operating income is $10,000. The company makes 2014 distributions to David of $11,000. David reports a(n):

Accepted Answer

A)  $1,000 LTCG. 
B)  $3,000 LTCG. 
C)  $11,000 LTCG. 
D)  Loan basis of $10,000. 
A)  $1,000 LTCG. 
B)  $3,000 LTCG. 
C)  $11,000 LTCG. 
D)  Loan basis of $10,000.

Question 8

An S corporation must possess which of the following characteristics?

Accepted Answer

A)  Not more than one hundred shareholders. 
B)  Corporation organized in the U.S. 
C)  Only one class of stock. 
D)  All of the above are required of an S corporation. 
E)  None of the above are required of an S corporation. 
A)  Not more than one hundred shareholders. 
B)  Corporation organized in the U.S. 
C)  Only one class of stock. 
D)  All of the above are required of an S corporation. 
E)  None of the above are required of an S corporation.

Question 9

On January 2, 2013, Tim loans his S corporation $10,000. By the end of 2013, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000. During 2014, the company's operating income is $10,000. The company makes 2014 distributions to Tim of $8,000. Tim reports a(n):

Accepted Answer

A)  $2,000 LTCG. 
B)  $8,000 LTCG. 
C)  Stock basis of $2,000. 
D)  Loan basis of $10,000. 
A)  $2,000 LTCG. 
B)  $8,000 LTCG. 
C)  Stock basis of $2,000. 
D)  Loan basis of $10,000.

Question 10

husband and wife must consent to an S election if they own their stock jointly.

Accepted Answer

The answer of husband and wife must consent to an...

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

During 2014, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2013, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?

Accepted Answer

A)  Nutt recognizes a $1,000 LTCG. 
B)  Nutt's stock basis will be $2,000. 
C)  Nutt's ordinary income is $15,000. 
D)  Nutt's return of capital is $11,000. 
E)  None of the above. 
A)  Nutt recognizes a $1,000 LTCG. 
B)  Nutt's stock basis will be $2,000. 
C)  Nutt's ordinary income is $15,000. 
D)  Nutt's return of capital is $11,000. 
E)  None of the above.

Question 13

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 14

Alomar, a cash basis S corporation in Orlando, Florida, holds the following assets and liabilities on January 1, 2014, the date the S election is made.
   During 2014, Alomar collects the accounts receivable and pays the accounts payable. The land is sold for $3 million, and the taxable income for the year is $590,000. Calculate any built-in gains tax.

Accepted Answer

$206,500. The net unrealized built­in ga

Question 15

S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).

Accepted Answer

A) True 
 B)False

Question 16

The amount of any distribution to an S corporation shareholder is equal to the plus the fair market value of any other property distributed.

Accepted Answer

The answer of The amount of any distribution to an...

Question 17

Compare the distribution of property rules for an S corporation with the corresponding partnership rules.

Accepted Answer

The major difference involves distributi

Question 18

If an S corporation has C corporation E & P and passive investment income in excess of ____________________ % of its gross receipts for ____________________ consecutive taxable years,
the S election is terminated at the beginning of the year.

Accepted Answer

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

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M2?

An S corporation that has total assets of at least $10 million on Schedule L at the end of the tax year must file a Schedule M-3.

The § 1202 exclusion of on the disposition of small business stock (is/is not) available for S stock.

Explain the OAA concept.

Since loss property receives a in basis without any loss recognition, S corporation distributions of loss property should be .

On January 2, 2013, David loans his S corporation $10,000. By the end of 2013 David's stock basis is zero and the basis in his note has been reduced to $8,000. During 2014, the company's operating income is $10,000. The company makes 2014 distributions to David of $11,000. David reports a(n):

An S corporation must possess which of the following characteristics?

On January 2, 2013, Tim loans his S corporation $10,000. By the end of 2013, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000. During 2014, the company's operating income is $10,000. The company makes 2014 distributions to Tim of $8,000. Tim reports a(n):

husband and wife must consent to an S election if they own their stock jointly.

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

During 2014, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2013, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?

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

S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).

The amount of any distribution to an S corporation shareholder is equal to the plus the fair market value of any other property distributed.

Compare the distribution of property rules for an S corporation with the corresponding partnership rules.

If an S corporation has C corporation E & P and passive investment income in excess of % of its gross receipts for consecutive taxable years, the S election is terminated at the beginning of the year.

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

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M­2?

An S corporation that has total assets of at least $10 million on Schedule L at the end of the tax year must file a Schedule M-3.

The § 1202 exclusion of on the disposition of small business stock (is/is not) available for S stock.

Explain the OAA concept.

Since loss property receives a in basis without any loss recognition, S corporation distributions of loss property should be .

On January 2, 2013, David loans his S corporation $10,000. By the end of 2013 David's stock basis is zero and the basis in his note has been reduced to $8,000. During 2014, the company's operating income is $10,000. The company makes 2014 distributions to David of $11,000. David reports a(n):

An S corporation must possess which of the following characteristics?

On January 2, 2013, Tim loans his S corporation $10,000. By the end of 2013, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000. During 2014, the company's operating income is $10,000. The company makes 2014 distributions to Tim of $8,000. Tim reports a(n):

husband and wife must consent to an S election if they own their stock jointly.

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

During 2014, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2013, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?

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

S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).

The amount of any distribution to an S corporation shareholder is equal to the plus the fair market value of any other property distributed.

Compare the distribution of property rules for an S corporation with the corresponding partnership rules.

If an S corporation has C corporation E & P and passive investment income in excess of ____________________ % of its gross receipts for ____________________ consecutive taxable years, the S election is terminated at the beginning of the year.

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

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M2?

If an S corporation has C corporation E & P and passive investment income in excess of % of its gross receipts for consecutive taxable years, the S election is terminated at the beginning of the year.