Question 1

This year, Jiang, the sole shareholder of a calendar year S corporation, received a distribution of $17,000. On December 31 of the prior year, his stock basis was $3,000. The corporation earned $12,000 ordinary income during the year. It has no accumulated E&P. Which statement is correct? Ignore the 20% QBI deduction.

Accepted Answer

A)  Jiang recognizes a $2,000 LTCG. 
B)  Jiang's stock basis will be $2,000. 
C)  Jiang's ordinary income is $15,000. 
D)  Jiang's return of capital is $11,000.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

The choice of a flow-through entity for a closely-held corporation often is between a(n) _____________ (a Federal tax entity) and a(n)__________ (a state tax entity).

Accepted Answer

The answer of The choice of a flow-through entity for...

Question 4

The exclusion of ________________ on the disposition of small business stock (is/is not)________________ available for S stock.

Accepted Answer

The answer of The exclusion of ________________ on the disposition...

Question 5

All tax preference items flow through the S corporation, to be included in the shareholders' AMT calculations.

Accepted Answer

A) True 
 B)False

Question 6

Most limited liability partnerships can own stock in an S corporation.

Accepted Answer

A) True 
 B)False

Question 7

Where the S corporation rules are silent, C corporation provisions apply.

Accepted Answer

A) True 
 B)False

Question 8

Oxen Corporation incurs the following transactions. 
Oxen maintains a valid S election and does not distribute any assets (cash or property) to its sole shareholder, Megan. As a result, Megan must recognize (ignore 20% QBI deduction):

Accepted Answer

A)  Ordinary income of $103,000. 
B)  Ordinary income of $103,000 and long-term capital gain of $6,000. 
C)  Ordinary income of $103,000, long-term capital gain of $10,000, and $4,000 short-term capital loss. 
D)  Ordinary income of $109,000.

Question 9

An S corporation is subject to the following tax(es).

Accepted Answer

A)  Corporate income tax (§ 11). 
B)  Built-in gains tax. 
C)  Alternative minimum tax. 
D)  None of the above apply to S corporations.

Question 10

Tax-exempt income at the S corporation level flows through as taxable to the shareholder.

Accepted Answer

A) True 
 B)False

Question 11

If an S corporation has C corporation E & P and passive investment income in excess of ____________ % of its gross receipts for____________ consecutive taxable years, the S election is terminated at the beginning of the _______________ year.

Accepted Answer

The answer of If an S corporation has C corporation...

Question 12

Which statement is incorrect?

Accepted Answer

A)  S corporations are treated as corporations under state law. 
B)  S corporations are treated as partnerships for Federal income tax purposes. 
C)  Distributions of appreciated property are taxable to the S corporation. 
D)  None of the above statements is incorrect.

Question 13

You are given the following facts about a 50% owner of an S corporation. Compute her ending stock basis.

Accepted Answer

A)  $80,950. 
B)  $85,750. 
C)  $100,100. 
D)  $106,225.

Question 14

What statement is correct with respect to an S corporation?

Accepted Answer

A)  There is no advantage to elect § 1244 stock. 
B)  An S corporation can own up to 85% of an insurance company. 
C)  A resident alien may be a shareholder. 
D)  A voting trust arrangement is not available. 
E)  None of the above statements is true.

Question 15

An S corporation must possess which of the following characteristics?

Accepted Answer

A)  Not more than one hundred shareholders. 
B)  Corporation organized in the U.S. 
C)  Only one class of stock. 
D)  All of the above are required of an S corporation. 
E)  None of the above are required of an S corporation.

Question 16

Which statement is incorrect with respect to the number-of-shareholders test in filing an S election?

Accepted Answer

A)  Husband Jaime and wife Maria count as one shareholder. 
B)  Grandmother Adela and granddaughter Maria count as one shareholder. 
C)  Husband Jaime and the estate of wife Maria count as one shareholder. 
D)  Husband Jaime and ex-wife Isabel count as one shareholder. 
E)  None of the above statements is incorrect.

Question 17

A new S corporation shareholder can revoke the S election unilaterally, if he/she owns how much of the existing S corporation's stock?

Accepted Answer

A)  More than 50%. 
B)  50% or more. 
C)  The election can be revoked only if all of the shareholders consent. 
D)  The election cannot be revoked during the first year of the new shareholder's ownership.

Question 18

There are no advantages for an S corporation to issue § 1244 stock.

Accepted Answer

A) True 
 B)False

Question 19

A newly formed S corporation does not receive any tax benefit from a C corporation's NOL incurred in its first election tax year.

Accepted Answer

A) True 
 B)False

Question 20

The exclusion of gain on disposition of small business stock is not available on disposition of S corporation stock.

Accepted Answer

A) True 
 B)False

Exam 22: S Corporations

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

The choice of a flow-through entity for a closely-held corporation often is between a(n) ___ (a Federal tax entity) and a(n) (a state tax entity).

The exclusion of on the disposition of small business stock (is/is not) available for S stock.

All tax preference items flow through the S corporation, to be included in the shareholders' AMT calculations.

Most limited liability partnerships can own stock in an S corporation.

Where the S corporation rules are silent, C corporation provisions apply.

Oxen Corporation incurs the following transactions. Oxen maintains a valid S election and does not distribute any assets (cash or property) to its sole shareholder, Megan. As a result, Megan must recognize (ignore 20% QBI deduction) :

An S corporation is subject to the following tax(es) .

Tax-exempt income at the S corporation level flows through as taxable to the shareholder.

If an S corporation has C corporation E & P and passive investment income in excess of % of its gross receipts for consecutive taxable years, the S election is terminated at the beginning of the ___ year.

Which statement is incorrect?

You are given the following facts about a 50% owner of an S corporation. Compute her ending stock basis.

What statement is correct with respect to an S corporation?

An S corporation must possess which of the following characteristics?

Which statement is incorrect with respect to the number-of-shareholders test in filing an S election?

A new S corporation shareholder can revoke the S election unilaterally, if he/she owns how much of the existing S corporation's stock?

There are no advantages for an S corporation to issue § 1244 stock.

A newly formed S corporation does not receive any tax benefit from a C corporation's NOL incurred in its first election tax year.

The exclusion of gain on disposition of small business stock is not available on disposition of S corporation stock.