Question 1

How may an S corporation manage its liability for the built-in gains tax?

Accepted Answer

A taxable income limitation encourages a

Question 2

When an S corporation liquidates,which of its tax attributes disappear?

Accepted Answer

A) PTI. 
B) AAA. 
C) AEP. 
D) Suspended losses. 
E) All of the above. 
A) PTI. 
B) AAA. 
C) AEP. 
D) Suspended losses. 
E) All of the above.

Question 3

Explain how the domestic production activities deduction is used for an S corporation.

Accepted Answer

The § 199 deduction is determined at the

Question 4

On December 31,2009,Erica Sumners owns one share of an S corporation's 10 outstanding shares of stock.The basis of Erica's share is $300.During 2010,the S corporation has no income or deductions,but incurs a loss of $3,650.Using the separate-share approach,determine the amount of the loss allocated to Erica and calculate her stock basis in 2010.

Accepted Answer

Under the separate-share approach,the am

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Samantha owned 1,000 shares in Evita,Inc. ,an S corporation,that uses the calendar year.On October 11,2010,Samantha sells all of her Evita stock.Her basis at the beginning of 2010 was $60,000.Her share of the corporate income for 2010 was $22,000,and she receives a distribution of $37,000 between January 1 and October 11,2010.Her basis at the time of the sale is:

Accepted Answer

A) $45,000. 
B) $60,000. 
C) $75,000. 
D) $82,000. 
A) $45,000. 
B) $60,000. 
C) $75,000. 
D) $82,000.

Question 7

Lott Corporation in Macon,Georgia converts to S corporation status in 2010.Lott used the LIFO inventory method in 2009 and had a LIFO inventory of $420,000 (FIFO value of $550,000).How much tax must be added to the 2009 corporate tax liability,assuming that Lott is subject to a 35% tax rate.

Accepted Answer

A) $0. 
B) $11,375. 
C) $45,500. 
D) $130,000. 
E) None of the above. 
A) $0. 
B) $11,375. 
C) $45,500. 
D) $130,000. 
E) None of the above.

Question 8

A distribution of cash or other property by an S corporation to shareholders that does not exceed the balance of AAA during a one-year period following an S election termination receives special capital gain treatment.

Accepted Answer

A) True 
 B)False

Question 9

An S corporation may not amortize organizational expenses.

Accepted Answer

A) True 
 B)False

Question 10

An S shareholder's basis does not include a ratable share of any S corporation liabilities.

Accepted Answer

A) True 
 B)False

Question 11

An S shareholder's basis in his or her stock can be reduced below zero.

Accepted Answer

A) True 
 B)False

Question 12

The debt basis always is adjusted back to the original amount before any increase is made in the stock basis.

Accepted Answer

A) True 
 B)False

Question 13

Compensation for services rendered to an S corporation is not subject to FICA taxes.

Accepted Answer

A) True 
 B)False

Question 14

An S corporation must recognize ____________________ but not ____________________ on distributions of appreciated property.

Accepted Answer

The answer of An S corporation must recognize ____________________ but...

Question 15

Brew,an S corporation,has gross receipts of $190,000 and gross income of $170,000.Brew has AEP of $22,000 and ordinary income of $29,000.It has passive investment income of $100,000,with $40,000 of expenses directly related to the production of passive investment income.Calculate Brew's excess net passive income and any passive investment income penalty tax.

Accepted Answer

The S corporation incurred net passive i

Question 16

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

Accepted Answer

The answer of Bidden,Inc. ,a calendar year S corporation,incurred the...

Question 17

An S shareholder who dies during the corporate tax year must report his or her share of the pro rata income (or loss)up to the date of death on the final individual tax return.

Accepted Answer

A) True 
 B)False

Question 18

As a general rule,S corporation treatment is not advantageous when the individual tax rate far exceeds the applicable corporate tax rate.

Accepted Answer

A) True 
 B)False

Question 19

Malin,a 51% owner of an S corporation,has a stock basis of zero at the beginning of the year.Malin's basis in a $30,000 loan made to the S corporation and evidenced by a corporate note has been reduced to zero by pass-through losses.During the year,her net share of corporate ordinary income is $12,000.At the end of the year,Malin receives a $14,000 distribution.Determine any taxable income from the distribution.

Accepted Answer

A) $2,000 capital gain. 
B) $2,000 ordinary income. 
C) $12,000 ordinary income. 
D) $14,000 ordinary income. 
A) $2,000 capital gain. 
B) $2,000 ordinary income. 
C) $12,000 ordinary income. 
D) $14,000 ordinary income.

Question 20

An S corporation does not recognize a loss when distributing assets that are worth less than their basis.

Accepted Answer

A) True 
 B)False

Exam 22: S Corporations

How may an S corporation manage its liability for the built-in gains tax?

When an S corporation liquidates,which of its tax attributes disappear?

Explain how the domestic production activities deduction is used for an S corporation.

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

Lott Corporation in Macon,Georgia converts to S corporation status in 2010.Lott used the LIFO inventory method in 2009 and had a LIFO inventory of $420,000 (FIFO value of $550,000).How much tax must be added to the 2009 corporate tax liability,assuming that Lott is subject to a 35% tax rate.

A distribution of cash or other property by an S corporation to shareholders that does not exceed the balance of AAA during a one-year period following an S election termination receives special capital gain treatment.

An S corporation may not amortize organizational expenses.

An S shareholder's basis does not include a ratable share of any S corporation liabilities.

An S shareholder's basis in his or her stock can be reduced below zero.

The debt basis always is adjusted back to the original amount before any increase is made in the stock basis.

Compensation for services rendered to an S corporation is not subject to FICA taxes.

An S corporation must recognize ____________________ but not ____________________ on distributions of appreciated property.

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

An S shareholder who dies during the corporate tax year must report his or her share of the pro rata income (or loss)up to the date of death on the final individual tax return.

As a general rule,S corporation treatment is not advantageous when the individual tax rate far exceeds the applicable corporate tax rate.

An S corporation does not recognize a loss when distributing assets that are worth less than their basis.

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

An S corporation must recognize but not on distributions of appreciated property.