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Exam 15: S Corporations

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Question 41

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An S election is made on the shareholder's Form 2553.

A) True
B) False

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Question 42

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Realized gain is recognized by an S corporation on its distribution of ____________________ property.

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Question 43

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

Form 1120S provides an S shareholder's computation of his or her stock basis.

You are given the following facts about a 50% owner of an S corporation.Compute her ending stock basis. $\begin{array}{lr}\text { Increase in AAA } & \$ 32,000 \\\text { Increase in OAA } & 6,300 \\\text { Payroll tax penalty } & 2,140 \\\text { Owner's beginning stock basis } & 39,800 \\\text { Tax-exempt interest income } & 4,800 \\\text { Insurance premiums paid (nondeductible) } & 2,700 \\\text { Owner's additional stock purchases } & 22,000\end{array}$ ?

Yates Corporation elects S status, effective for current calendar tax year.Yates' only asset has a basis of $50,200 and a fair market value of $110,400 as of January 1.The asset is sold at the end of the year for $130,800.What amount must Mark Farris, a 60% owner and subject to a 15% income tax rate, pay, if any?

An S corporation must possess which of the following characteristics?

A two-or-more member ____________________ operates under ____________________ tax principles.

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

Depreciation recapture income is a ____________________ computed amount.

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.

An S corporation is limited to a theoretical maximum of ____________________ shareholders.

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

You are given the following facts about a solely owned S corporation.What is the shareholder's ending stock basis? $\begin{array}{lr}\text { Increase in AAA } & \$ 31,000 \\\text { Increase in OAA } & 6,300 \\\text { Payroll tax penalty } & 2,140 \\\text { Beginning stock basis } & 39,800 \\\text { Stock purchases } & 22,000 \\\text { Tax-exempt life insurance proceeds } & 4,800 \\\text { Life insurance premiums paid } & 2,700\\\text { (nondeductible) }\end{array}$ ?

​A corporation can revoke its S election prospectively.

S corporations are treated as partnerships under state property laws.

Any distribution of cash or property by a corporation that does not exceed the balance of AAA with respect to S stock during a post-termination transition period of approximately one year is applied against and reduces the basis of the S stock.

Tax-exempt income is not separately stated on Schedule K of Form 1120S.

​AAA can have a negative balance.

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2?