Question 1

Passive investment income includes net capital gains from the sale of stocks and securities.

Accepted Answer

A) True 
 B)False

Question 2

Excess net passive income of an S corporation is $40,000 and taxable income is $32,000.Assuming that there is $50,000 of accumulated earnings and profits from a C corporation year,calculate any passive income penalty tax.

Accepted Answer

A) $0. 
B) $4,500. 
C) $10,500. 
D) $11,200. 
E) Some other amount. 
A) $0. 
B) $4,500. 
C) $10,500. 
D) $11,200. 
E) Some other amount.

Question 3

Distributions of which assets during an S corporation's post-termination period receive favorable income tax treatment?

Accepted Answer

A) Cash. 
B) Automobile. 
C) Real estate. 
D) Notes receivable. 
E) All of the above. 
A) Cash. 
B) Automobile. 
C) Real estate. 
D) Notes receivable. 
E) All of the above.

Question 4

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

Question 5

Claude Bergeron sold 1,000 shares of Ditta,Inc. ,an S corporation located in Concord,North Carolina,for $9,000.He had owned the stock for three years and had a stock basis of $107,000 in the shares.Assuming that Claude is single and that he is the original owner of these § 1244 stock shares,calculate the appropriate tax treatment of any gain or loss.

Accepted Answer

A) No gain or loss. 
B) $50,000 LTCL;$48,000 ordinary deduction. 
C) $50,000 ordinary deduction;$48,000 LTCL. 
D) $98,000 long-term capital loss. 
E) None of the above. 
A) No gain or loss. 
B) $50,000 LTCL;$48,000 ordinary deduction. 
C) $50,000 ordinary deduction;$48,000 LTCL. 
D) $98,000 long-term capital loss. 
E) None of the above.

Question 6

The taxable LIFO recapture amount equals the excess of the inventory's value under ____________________ over the ____________________ value.

Accepted Answer

The answer of The taxable LIFO recapture amount equals the...

Question 7

Passive investment income includes gains from the sale of securities.

Accepted Answer

A) True 
 B)False

Question 8

The pro rata method assigns an equal amount of each of the S corporation items (e.g. ,LTCG)to each day of the year.

Accepted Answer

A) True 
 B)False

Question 9

If a loan's basis has been reduced and has not been restored,income is recognized when the S corporation ____________________ the shareholder.

Accepted Answer

The answer of If a loan's basis has been reduced...

Question 10

On January 2,2009,David loans his S corporation $10,000,and 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 $11,000.Which statement is correct?

Accepted Answer

A) $1,000 LTCG. 
B) $3,000 LTCG. 
C) $11,000 LTCG. 
D) Loan basis is $10,000. 
E) None of the above statements is correct. 
A) $1,000 LTCG. 
B) $3,000 LTCG. 
C) $11,000 LTCG. 
D) Loan basis is $10,000. 
E) None of the above statements is correct.

Question 11

Post-termination distributions that are charged against ____________________ do not get tax-free treatment.

Accepted Answer

The answer of Post-termination distributions that are charged against ____________________...

Question 12

The maximum number of S shareholders is:

Accepted Answer

A) 75. 
B) 100. 
C) 200. 
D) Indeterminable. 
E) Some other amount. 
A) 75. 
B) 100. 
C) 200. 
D) Indeterminable. 
E) Some other amount.

Question 13

On January 1,Bobby and Alice own equally all of the stock of an electing S corporation called Prairie Dirt Delight.The dirt company has a $60,000 loss for a non-leap year.On the 219th day of the year,Bobby sells his one-half of the stock to his son,Paul.How much of the $60,000 loss,if any,is allocated to Bobby?

Accepted Answer

A) $0. 
B) $18,000. 
C) $36,000. 
D) $60,000. 
E) None of the above. 
A) $0. 
B) $18,000. 
C) $36,000. 
D) $60,000. 
E) None of the above.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Pepper,Inc. ,an S corporation in Norfolk,Virginia,has revenues of $400,000,taxable interest of $380,000,operating expenses of $250,000,and deductions attributable to the interest income of $140,000.What is Pepper's § 1375 penalty tax payable?

Accepted Answer

A) $0. 
B) $40,895. 
C) $185,000. 
D) $380,000. 
E) Some other amount. 
A) $0. 
B) $40,895. 
C) $185,000. 
D) $380,000. 
E) Some other amount.

Question 16

An S corporation that has total assets of at least $5 million on Schedule L at the end of the tax year must file a Schedule M-3.

Accepted Answer

A) True 
 B)False

Question 17

Which type of distribution from an S corporation is taxed at the 0/15% rate?

Accepted Answer

A) AAA. 
B) PTI. 
C) OAA. 
D) AEP. 
E) None of the above. 
A) AAA. 
B) PTI. 
C) OAA. 
D) AEP. 
E) None of the above.

Question 18

The carryover period for the NOLs of a C corporation continues to run during S corporation years.

Accepted Answer

A) True 
 B)False

Question 19

The § 1202 exclusion of gain on disposition of S corporation stock is not available.

Accepted Answer

A) True 
 B)False

Question 20

Where the S corporation rules are silent,partnership rules apply to the S corporation.

Accepted Answer

A) True 
 B)False

Exam 22: S Corporations

Passive investment income includes net capital gains from the sale of stocks and securities.

Excess net passive income of an S corporation is $40,000 and taxable income is $32,000.Assuming that there is $50,000 of accumulated earnings and profits from a C corporation year,calculate any passive income penalty tax.

Distributions of which assets during an S corporation's post-termination period receive favorable income tax treatment?

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

The taxable LIFO recapture amount equals the excess of the inventory's value under ____________________ over the ____________________ value.

Passive investment income includes gains from the sale of securities.

The pro rata method assigns an equal amount of each of the S corporation items (e.g. ,LTCG)to each day of the year.

If a loan's basis has been reduced and has not been restored,income is recognized when the S corporation ____________________ the shareholder.

On January 2,2009,David loans his S corporation $10,000,and 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 $11,000.Which statement is correct?

Post-termination distributions that are charged against ____________________ do not get tax-free treatment.

The maximum number of S shareholders is:

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

Pepper,Inc. ,an S corporation in Norfolk,Virginia,has revenues of $400,000,taxable interest of $380,000,operating expenses of $250,000,and deductions attributable to the interest income of $140,000.What is Pepper's § 1375 penalty tax payable?

An S corporation that has total assets of at least $5 million on Schedule L at the end of the tax year must file a Schedule M-3.

Which type of distribution from an S corporation is taxed at the 0/15% rate?

The carryover period for the NOLs of a C corporation continues to run during S corporation years.

The § 1202 exclusion of gain on disposition of S corporation stock is not available.

Where the S corporation rules are silent,partnership rules apply to the S corporation.

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

The taxable LIFO recapture amount equals the excess of the inventory's value under over the value.