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Exam 22: S Corporations

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Question 61

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A corporation can revoke its S election as of a future date.

A) True
B) False

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Question 62

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Lent Corporation converts to S corporation status in 2019. 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 2020?

A) $-0-.
B) $7,350.
C) $29,400.
D) $140,000.

E) B) and D)
F) A) and C)

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Question 63

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

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

An S corporation's AAA can have a negative balance.

Tax-exempt income at the corporate level flows through as exempt income to S shareholders.

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

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

If a resident alien shareholder moves outside the United States, the S election is terminated.

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

A calendar year C corporation reports a $41,000 NOL in 2019, but it elects S status for 2020 and generates an NOL of $30,000 in that year. At all times during 2020, the stock of the corporation was owned by the same 10 shareholders, each of whom owned 10% of the stock. Kris, one of the 10 shareholders, holds an S stock basis of $2,300 at the beginning of 2020. How much of the 2020 loss, if any, can she deduct?

Bidden, Inc., a calendar year S corporation, incurred the following items. $\begin{array} { l c } \text { Sales } & \$ 130,000 \\\text { Depreciation recapture income } & 12,000 \\\text { Short-term capital gain } & 30,000 \\\text { Cost of goods sold } & ( 42,000 ) \\\text { Municipal bond interest income } & 7,000 \\\text { Administrative expenses } & ( 15,000 ) \\\text { Depreciation expense } & ( 17,000 ) \\\text { Charitable contributions } & ( 14,000 )\end{array}$ Calculate Bidden's nonseparately computed income.

Since loss property receives a in basis without any loss recognition, S corporation distributions of loss property generally should be .

An item such as tax-exempt interest that appears in the Other Adjustments Account affects stock basis, but not AAA.

Fred is the sole shareholder of an S corporation in Fort Deposit, Alabama. At a time when his stock basis is $20,000, the corporation distributes appreciated property worth $100,000 (basis of $20,000) . Fred's taxable gain is:

A per-day, per-share allocation of flow-through S corporation items must be used.

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.

Only 51% of the shareholders must consent to an S election.

Persons who were S shareholders during any part of the year before the election date but were not shareholders when the election was made also must consent to an S election.

Explain the OAA concept.