Question 1

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 2

The Schedule M-3 is the same for a C corporation and an S corporation.

Accepted Answer

A) True 
 B)False  False

Question 3

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

Accepted Answer

The major difference involves distributions of appreciated property.Under the S corporation rules, realized gain on distributed appreciated property is recognized to the corporation, which passes through to the shareholders with no corporate-level tax (other than the built-in gains tax).The gain increases the shareholder's stock basis.A realized loss, however, is not recognized for an S corporation distribution.The shareholder takes a market value basis in the property.
On the distribution, the shareholder's stock basis is reduced by the fair market value of the property (but not below zero).
No gain or loss is recognized to a partnership or partners on the distribution of property.Basis to the partner in the asset is the lesser of the partner's basis in the partnership or the entity's basis in the asset.

Question 4

Identify a disadvantage of being an S corporation.

Accepted Answer

A) Generally, trusts cannot be shareholders. 
B) Losses flow through to the shareholders. 
C) The AMT on corporations is avoided. 
D) Tax-exempt income flows through to the shareholders. 
E) None of the above is a disadvantage of the S election. 
A) Generally, trusts cannot be shareholders. 
B) Losses flow through to the shareholders. 
C) The AMT on corporations is avoided. 
D) Tax-exempt income flows through to the shareholders. 
E) None of the above is a disadvantage of the S election.

Question 5

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 6

On January 2, 2011, David loans his S corporation $10,000, and by the end of 2011 David's stock basis is zero and the basis in his note has been reduced to $8,000.During 2012, the company's operating income is $10,000.The company also makes 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 7

Several individuals acquire assets on behalf of Skip Corporation on May 28, 2012, purchased assets on June 3, 2012, and began business on June 11, 2012.They subscribe to shares of stock, file articles of incorporation for Skip, and become shareholders on June 21, 2012.The S election must be filed no later than 2 1/2 months after:

Accepted Answer

A) May 28, 2012. 
B) June 3, 2012. 
C) June 11, 2012. 
D) June 21, 2012. 
E) December 31, 2012. 
A) May 28, 2012. 
B) June 3, 2012. 
C) June 11, 2012. 
D) June 21, 2012. 
E) December 31, 2012.

Question 8

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 9

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 10

Which statement is incorrect?

Accepted Answer

A) S corporations are treated as corporations under state law. 
B) S corporations resemble partnerships under the Federal income tax law. 
C) The alternative minimum tax applies to some S corporations. 
D) An S corporation may not allocate income and deduction items to specific shareholders like a partnership can. 
A) S corporations are treated as corporations under state law. 
B) S corporations resemble partnerships under the Federal income tax law. 
C) The alternative minimum tax applies to some S corporations. 
D) An S corporation may not allocate income and deduction items to specific shareholders like a partnership can.

Question 11

Which equity arrangement cannot be used by an S corporation?

Accepted Answer

A) Phantom stock. 
B) Stock appreciation rights. 
C) Warrants. 
D) Straight debt. 
E) An insurance company structure. 
A) Phantom stock. 
B) Stock appreciation rights. 
C) Warrants. 
D) Straight debt. 
E) An insurance company structure.

Question 12

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 13

An S corporation may be subject to the following tax.

Accepted Answer

A) Built-in gains tax. 
B) Foreign earnings tax. 
C) Federal income tax. 
D) Alternative minimum tax. 
A) Built-in gains tax. 
B) Foreign earnings tax. 
C) Federal income tax. 
D) Alternative minimum tax.

Question 14

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

Accepted Answer

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

Question 15

An S corporation may not have a ____________________ alien shareholder.

Accepted Answer

The answer of An S corporation may not have a...

Question 16

Charitable contributions are subject to a 10% limitation at the S corporation level.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

An S shareholder's basis is increased by stock purchases and capital contributions.

Accepted Answer

A) True 
 B)False

Question 19

S corporation status allows shareholders to realize tax benefits from corporate losses ____________________.

Accepted Answer

The answer of S corporation status allows shareholders to realize...

Question 20

Any losses that are suspended under the at-risk rules are carried forward and are available during an S corporation's post-termination period.

Accepted Answer

A) True 
 B)False

Exam 22: S: Corporations

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

The Schedule M-3 is the same for a C corporation and an S corporation.

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

Identify a disadvantage of being an S corporation.

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

On January 2, 2011, David loans his S corporation $10,000, and by the end of 2011 David's stock basis is zero and the basis in his note has been reduced to $8,000.During 2012, the company's operating income is $10,000.The company also makes distributions to David of $11,000.David reports a(n):

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

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

Which statement is incorrect?

Which equity arrangement cannot be used by an S corporation?

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

An S corporation may be subject to the following tax.

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

An S corporation may not have a ____________________ alien shareholder.

Charitable contributions are subject to a 10% limitation at the S corporation level.

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

An S shareholder's basis is increased by stock purchases and capital contributions.

S corporation status allows shareholders to realize tax benefits from corporate losses ____________________.

Any losses that are suspended under the at-risk rules are carried forward and are available during an S corporation's post-termination period.

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

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