Question 1

When loss assets are distributed by an S corporation,a shareholder's basis is equal to the asset's fair market value.

Accepted Answer

A) True 
 B)False  True

Question 2

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2?

Accepted Answer

A) Payroll penalty. 
B) Unreasonable compensation. 
C) Life insurance proceeds (nontaxable to the recipient S corporation). 
D) Taxable interest. 
A) Payroll penalty. 
B) Unreasonable compensation. 
C) Life insurance proceeds (nontaxable to the recipient S corporation). 
D) Taxable interest. C

Question 3

On December 31,Erica Sumners owns one share of an S corporation's 10 outstanding shares of stock.The basis of Erica's share is $300.The next year the S corporation incurs a loss of $3,650.Determine the amount of the loss allocated to Erica,and calculate her stock basis at the end of the second year.

Accepted Answer

The loss assigned to each day of the S corporation's tax year is $10 ($3,650/365 days).For each day,$1 is allocated to each outstanding share ($10/10 shares).Erica is allocated $365 of loss for her one share owned during the tax year.However,she is limited to a loss deduction of $300,i.e.,such that her stock basis reaches zero.Her stock basis is zero at the end of the year.She has a $65 loss carryforward available for deduction in subsequent years.

Question 4

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

Accepted Answer

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

Question 5

​AAA can have a negative balance.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

If a resident alien shareholder moves outside the U.S.,the S election is terminated.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

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

Gene Grams is a 45% owner of a calendar year S corporation during the tax year.His beginning stock basis is $230,000,and the S corporation reports the following items.
​
   
Calculate Grams's stock basis at year-end.

Accepted Answer

The answer of Gene Grams is a 45% owner of...

Question 11

Stock basis first is increased by income items,then ____________________ by distributions,and finally decreased by ____________________.

Accepted Answer

The answer of Stock basis first is increased by income...

Question 12

Towne,Inc.,a calendar year S corporation,holds AAA of $627,050 at the beginning of the tax year.During the year,the following items occur.
​
   
Calculate Towne's ending AAA balance.

Accepted Answer

The answer of Towne,Inc.,a calendar year S corporation,holds AAA of...

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Which of the following reduces a shareholder's S corporation stock basis?

Accepted Answer

A) Depletion deductions in excess of the basis of property. 
B) Illegal kickbacks paid. 
C) Nontaxable income. 
D) Sales income. 
A) Depletion deductions in excess of the basis of property. 
B) Illegal kickbacks paid. 
C) Nontaxable income. 
D) Sales income.

Question 16

You are given the following facts about a solely owned S corporation.What is the shareholder's ending stock basis?
​

Accepted Answer

A) $61,800 
B) $68,100 
C) $99,100 
D) $100,100 
A) $61,800 
B) $68,100 
C) $99,100 
D) $100,100

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Any distribution of cash or property by a corporation that does not exceed the balance of AAA with respect to S stock during a post-termination transition period of approximately one year is applied against and reduces the basis of the S stock.

Accepted Answer

A) True 
 B)False

Question 20

An S corporation that has total assets of at least $50 million on Schedule L at the end of the tax year must file a Schedule M-3.

Accepted Answer

A) True 
 B)False

Exam 22: S Corporations

When loss assets are distributed by an S corporation,a shareholder's basis is equal to the asset's fair market value.

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2?

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

​AAA can have a negative balance.

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

If a resident alien shareholder moves outside the U.S.,the S election is terminated.

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

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

Gene Grams is a 45% owner of a calendar year S corporation during the tax year.His beginning stock basis is $230,000,and the S corporation reports the following items. ​ Calculate Grams's stock basis at year-end.

Stock basis first is increased by income items,then ____________________ by distributions,and finally decreased by ____________________.

Towne,Inc.,a calendar year S corporation,holds AAA of $627,050 at the beginning of the tax year.During the year,the following items occur. ​ Calculate Towne's ending AAA balance.

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

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

Which of the following reduces a shareholder's S corporation stock basis?

You are given the following facts about a solely owned S corporation.What is the shareholder's ending stock basis? ​

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

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

Any distribution of cash or property by a corporation that does not exceed the balance of AAA with respect to S stock during a post-termination transition period of approximately one year is applied against and reduces the basis of the S stock.

An S corporation that has total assets of at least $50 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

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxable Exchanges

Property Transactions, capital Gains and Losses, sec1231, and 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 Reorganization

Partnerships

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

AAA can have a negative balance.

Gene Grams is a 45% owner of a calendar year S corporation during the tax year.His beginning stock basis is $230,000,and the S corporation reports the following items. Calculate Grams's stock basis at year-end.

Stock basis first is increased by income items,then by distributions,and finally decreased by .

Towne,Inc.,a calendar year S corporation,holds AAA of $627,050 at the beginning of the tax year.During the year,the following items occur. Calculate Towne's ending AAA balance.

You are given the following facts about a solely owned S corporation.What is the shareholder's ending stock basis?