Question 1

Depletion in excess of basis in property causes a(n)____________________ adjustment to an S shareholder's basis.

Accepted Answer

upward or increase

Question 2

The § 1374 tax is a corporate-level tax on any built-in gain recognized in 2010 when an S corporation disposes of an asset in a taxable disposition within 7 tax years after the date on which the S election took effect.

Accepted Answer

A) True 
 B)False  True

Question 3

Randall owns 800 shares in Fabrication,Inc. ,an S corporation in Moss Hill,Texas.In 2010,his basis in his stock is $30,000,before the adjustment for this year's losses.During 2010,Randall's share of the corporation's ordinary loss is $20,000 and his share of its capital loss is $15,000.How much can Randall deduct due to these losses?

Accepted Answer

A) None. 
B) $15,000 ordinary loss;$10,000 capital loss. 
C) $17,143 ordinary loss;$12,857 capital loss. 
D) $20,000 ordinary loss;$15,000 capital loss. 
E) Some other amounts. 
A) None. 
B) $15,000 ordinary loss;$10,000 capital loss. 
C) $17,143 ordinary loss;$12,857 capital loss. 
D) $20,000 ordinary loss;$15,000 capital loss. 
E) Some other amounts. C

Question 4

S corporations are treated much like ____________________ for tax purposes.

Accepted Answer

The answer of S corporations are treated much like ____________________...

Question 5

A capital loss allocated to a shareholder always reduces the other adjustments account.

Accepted Answer

A) True 
 B)False

Question 6

Pass-through S corporation losses can reduce the basis in the shareholder's loan to the entity,but distributions do not.

Accepted Answer

A) True 
 B)False

Question 7

Which equity arrangement would stop a corporation from being 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 8

An S corporation may not have a ____________________ alien shareholder.

Accepted Answer

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

Question 9

Which statement is incorrect?

Accepted Answer

A) S corporation status allows shareholders to realize tax benefits from corporate losses immediately. 
B) Shareholder-level tax on corporate profits can be eliminated by a step-up in the basis of the stock upon the shareholders death. 
C) Less than 50% of corporations make the S election. 
D) An S corporation resembles an LLC for Federal income tax purposes. 
E) None of the above. 
A) S corporation status allows shareholders to realize tax benefits from corporate losses immediately. 
B) Shareholder-level tax on corporate profits can be eliminated by a step-up in the basis of the stock upon the shareholders death. 
C) Less than 50% of corporations make the S election. 
D) An S corporation resembles an LLC for Federal income tax purposes. 
E) None of the above.

Question 10

Fred is the sole shareholder of an S corporation in Fort Deposit,Alabama.At a time when his stock basis is $10,000,the corporation distributes appreciated property worth $100,000 (basis of $10,000).There is no built-in gain.Fred's taxable gain is:

Accepted Answer

A) $0. 
B) $10,000. 
C) $90,000. 
D) $100,000. 
E) None of the above. 
A) $0. 
B) $10,000. 
C) $90,000. 
D) $100,000. 
E) None of the above.

Question 11

Apple,Inc. ,a cash basis S corporation in Orange,Texas,formerly was a C corporation.Apple has the following assets and liabilities on January 1,2010,the date the S election is made.   During 2010,Apple collects the accounts receivable and pays the accounts payable.The land is sold for $3 million,and taxable income for the year is $590,000.What is Apple's built-in gains tax?

Accepted Answer

A) $0. 
B) $206,500. 
C) $590,000. 
D) $695,000. 
E) Some other amount. 
A) $0. 
B) $206,500. 
C) $590,000. 
D) $695,000. 
E) Some other amount.

Question 12

An S corporation shareholder's basis includes his or her direct investments plus a ratable share of any corporate liabilities.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Dawn Adams owns 60% of a calendar year S corporation during 2010.Her stock basis on December 31,2009 is $17,000,and her debt basis is $2,000.If the S corporation incurs a $48,000 loss for 2010,what amount may Ms.Adams deduct on her individual tax return?

Accepted Answer

Dawn Adams may deduct only $19,000 ($17,

Question 15

An S corporation reports $10,000 DPGR and $7,500 of wages,and the S corporation's QPAI is $2,500.Shelly has a 50% interest in the S corporation.All expenses that reduce DPGR are from wages,and all wages paid relate to DPGR.How much QPAI and wages are allocated to Shelly?

Accepted Answer

A) $1,250 QPAI and $3,750 wages. 
B) $2,500 QPAI and $7,500 wages. 
C) $1,250 QPAI and $1,875 wages. 
D) $2,500 QPAI and $1,875 wages. 
E) None of the above. 
A) $1,250 QPAI and $3,750 wages. 
B) $2,500 QPAI and $7,500 wages. 
C) $1,250 QPAI and $1,875 wages. 
D) $2,500 QPAI and $1,875 wages. 
E) None of the above.

Question 16

A distribution from previously taxed income is taxable.

Accepted Answer

A) True 
 B)False

Question 17

An S corporation in Lawrence,Kansas has a recognized built-in gain of $110,000 and taxable income of $98,000.The company has an $8,000 NOL carryforward from a C corporation year,and a $9,000 business credit carryforward from a C corporation year.The built-in gains tax liability is:

Accepted Answer

A) $0. 
B) $22,500. 
C) $25,300. 
D) $30,500. 
E) None of the above. 
A) $0. 
B) $22,500. 
C) $25,300. 
D) $30,500. 
E) None of the above.

Question 18

An S election is made on Form 2550.

Accepted Answer

A) True 
 B)False

Question 19

Net operating losses incurred before an S election do not flow through to the shareholders once the election is in effect.

Accepted Answer

A) True 
 B)False

Question 20

A two-or-more member LLC operates under partnership tax principles.

Accepted Answer

A) True 
 B)False

Exam 22: S Corporations

Depletion in excess of basis in property causes a(n)____________________ adjustment to an S shareholder's basis.

The § 1374 tax is a corporate-level tax on any built-in gain recognized in 2010 when an S corporation disposes of an asset in a taxable disposition within 7 tax years after the date on which the S election took effect.

S corporations are treated much like ____________________ for tax purposes.

A capital loss allocated to a shareholder always reduces the other adjustments account.

Pass-through S corporation losses can reduce the basis in the shareholder's loan to the entity,but distributions do not.

Which equity arrangement would stop a corporation from being an S corporation?

An S corporation may not have a ____________________ alien shareholder.

Which statement is incorrect?

Fred is the sole shareholder of an S corporation in Fort Deposit,Alabama.At a time when his stock basis is $10,000,the corporation distributes appreciated property worth $100,000 (basis of $10,000).There is no built-in gain.Fred's taxable gain is:

An S corporation shareholder's basis includes his or her direct investments plus a ratable share of any corporate liabilities.

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

Dawn Adams owns 60% of a calendar year S corporation during 2010.Her stock basis on December 31,2009 is $17,000,and her debt basis is $2,000.If the S corporation incurs a $48,000 loss for 2010,what amount may Ms.Adams deduct on her individual tax return?

An S corporation reports $10,000 DPGR and $7,500 of wages,and the S corporation's QPAI is $2,500.Shelly has a 50% interest in the S corporation.All expenses that reduce DPGR are from wages,and all wages paid relate to DPGR.How much QPAI and wages are allocated to Shelly?

A distribution from previously taxed income is taxable.

An S corporation in Lawrence,Kansas has a recognized built-in gain of $110,000 and taxable income of $98,000.The company has an $8,000 NOL carryforward from a C corporation year,and a $9,000 business credit carryforward from a C corporation year.The built-in gains tax liability is:

An S election is made on Form 2550.

Net operating losses incurred before an S election do not flow through to the shareholders once the election is in effect.

A two-or-more member LLC operates under partnership tax principles.

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

Part 1--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Part 2--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses,1231,and Recapure Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Distributions in Complete Liquidation and an Overview of Reorganizations

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