Exam 22: S Corporations

Lent Corporation converts to S corporation status in 2018. Lent had been using the LIFO inventory method and held a LIFO inventory value of $510,000 (FIFO value of $650,000). How much tax must be added to the C corporation tax liability for the year before the S election in 2019.

Separately stated items are listed on Schedule __________________ of the Form 1120S.

Discuss two ways that an S election may be terminated.

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

A former spouse is treated as being in the same family as the individual to whom he or she was married, for purposes of determining the number of S corporation shareholders.

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

An S corporation's separately stated items generally are identical to those separately stated by_________________________.

Which item is not included in an S corporation's nonseparately computed income?

An S shareholder's stock basis can be reduced below zero.

On January 2, 2018, Tim loans his S corporation $10,000. By the end of 2018, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000. During 2019, the company's operating income is $10,000. The company makes 2019 distributions to Tim of $8,000. Tim reports a(n):

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

Shareholders owning a(n) of shares (voting and nonvoting) may ____________________ revoke an S election.

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

On January 2, 2018, David loans his S corporation $10,000. By the end of 2018 David's stock basis is zero and the basis in his note has been reduced to $8,000. During 2019, the company's operating income is $10,000. The company makes 2019 distributions to David of $11,000. David reports a(n):

Donna and Mark are married and file a joint return reporting taxable income of $350,000. Donna owns a qualified S corporation that is not a specified service business. During the year, Donna incurs qualified business income of $75,000. Donna's share of wages paid by the business is $20,000. Assuming there is no qualified property factor, calculate her 20% QBI deduction.

Amit, Inc., an S corporation, holds an AAA balance of $614,000 at the beginning of the tax year. During the year, the following items occur. Amit's ending AAA balance is:

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

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.

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

The AAA begins with a zero balance on the first day of an S corporation's first tax year.