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Exam 15: S Corporations

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Question 61

Multiple Choice

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

A) Depletion deductions in excess of the basis of property.
B) Illegal kickbacks paid.
C) Nontaxable income.
D) Sales income.
E) A 20% QBI deduction.

F) B) and E)
G) A) and B)

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Question 62

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

A) True
B) False

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Question 63

Multiple Choice

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On January 1, Bobby and Alice own equally all of the stock of an electing S corporation called Prairie Dirt Delight.The entity incurs a $60,000 loss for a non-leap year.On the 200th day of the year not a leap year) , Bobby sells his one-half of the stock to his son, Saul.How much of the $60,000 loss, if any, is allocated to Bobby?

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.

Post-termination distributions that are charged against OAA are received tax-free.

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

A cash basis calendar year C corporation reports $100,000 of accounts receivable on the date of its conversion to S status on February 14.By the end of the year, $60,000 of these receivables are collected.Calculate any built-in gains tax, assuming that there is sufficient taxable income.

Samantha owned 1,000 shares in Evita, Inc., an S corporation, that uses the calendar year.On October 11, Samantha sells all of her Evita stock.Her stock basis at the beginning of the tax year was $60,000.Evita's ordinary income for the year was $22,000 through the date of sale, and she receives a distribution of $35,000 on May 3rd.Her stock basis at the time of the sale is:

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

A corporation can revoke its S election prospectively.

In the case of a complete termination of an S corporation interest, a tax year may occur.

Depreciation recapture income is a Schedule K item on the Form 1120S.

If the beginning balance in OAA is zero, and the following transactions occur, what is the ending OAA balance? A)$1,300.

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

Compensation for services rendered to an S corporation is subject to FICA taxes.

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

An S shareholder's basis is decreased by distributions treated as being paid from AAA.

Which statement is incorrect with respect to an S shareholder's consent?