Exam 22: S Corporations

Quadrant,Inc. ,is a former C corporation whose first S corporation year began on January 1,2010.At that time,Quadrant had two assets: X,with a value of $1,000 and a basis of $400;and Y,with a value of $400 and a basis of $600.The net unrealized built-in gain as of January 1,2010,is $400 (i.e. ,X's $600 gain less Y's $200 loss).Asset X is sold for $1,200 during 2010,and asset Y is retained.The recognized built-in gain in 2010 is:

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

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

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

Which statement is false?

On January 2,2009,David loans his S corporation $10,000.By the end of 2009,David's stock basis is zero,and the basis in his note has been reduced to $8,000.During 2010,the company's operating income is $10,000.The company also makes distributions to David of $8,000.Which statement is correct?

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

Individuals Adam and Bonnie form an S corporation,with Adam contributing cash of $100,000 for a 50% interest and Bonnie contributing appreciated ordinary income property with an adjusted basis of $20,000 and a fair market value of $100,000.

A C corporation elects S status.The corporation may be subject to a built-in gains tax on which of the following assets?

A calendar year C corporation has a $39,000 NOL in 2009,but elects S status for 2010 and generates an NOL of $30,000 in 2010.At all times during 2010,the stock of the corporation was owned by the same 10 shareholders,each of whom owned 10% of the stock.Kris,one of the 10 shareholders,has an adjusted stock basis of $2,300 at the beginning of 2010.What amount of the loss,if any,is deductible by Kris in 2010?

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

Which corporation is eligible to make the S election?

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

Which statement is incorrect with respect to filing for an S election?

With respect to passive losses,there are three classes of income,losses,and credits: ____________________,____________________,and passive. or

During 2010,Lion Corporation incurs the following transactions. Lion maintains a valid S election and does not distribute any assets (cash or property)to its sole shareholder,Penny.As a result,Penny must recognize:

An S corporation recognizes a gain on any distribution of ____________________ property.

Several individuals acquire assets on behalf of Skip Corporation on May 28,2010,purchased assets on June 3,2010,and begin doing business on June 11,2010.They subscribe to shares of stock,file articles of incorporation for Skip,and become shareholders on June 21,2010.The S election must be filed no later than 2 1/2 months after:

Your client is a C corporation that wishes to convert to S status.Advise this corporation with respect to minimizing any § 1374 built-in gains tax.

The passive loss limitations apply at the S corporation shareholder level.