Question 1

An S shareholder's basis in his or her stock can be reduced below zero.

Accepted Answer

A) True 
 B)False

Question 2

Ryan is the sole shareholder of Sweetwater Apartments, an S corporation in Sour Lake, Texas.At a time when his stock basis is $10,000, the corporation distributes appreciated property worth $100,000 (basis of $10,000) .There is no built-in gain.Ryan's taxable gain is:

Accepted Answer

A)  $0.
B)  $10,000.
C)  $90,000.
D)  $100,000.E) C) and D)
F) B) and C)

Question 3

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

Accepted Answer

A)  A resident alien.
B)  A U.S.partnership.
C)  A foreign corporation.
D)  None of the above can own S stock.E) A) and B)
F) A) and C)

Question 4

An S shareholder's stock basis includes a ratable share of any S corporation liabilities.

Accepted Answer

A) True 
 B)False

Question 5

Meeting the definition of a small business corporation is a ____________________ requirement for maintaining the S status.

Accepted Answer

The answer of Meeting the definition of a small business...

Question 6

A cash basis calendar year C corporation reports $100,000 of accounts receivable on the date of its conversion to an S corporation 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.

Accepted Answer

A)  $0.
B)  $10,000.
C)  $21,000.
D)  $35,000.E) All of the above
F) B) and C)

Question 7

During 2012, 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:

Accepted Answer

A)  Ordinary income of $103,000.
B)  Ordinary income of $103,000 and long-term capital gain of $5,000.
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.E) B) and D)
F) B) and C)

Question 8

List some of the separately stated items listed on Schedule K of the Form 1120S.

Accepted Answer

The answer of List some of the separately stated items...

Question 9

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

Accepted Answer

A)  A consent extension is available only if Form 2553 is filed on a timely basis, reasonable cause is given, and the interests of the government are not jeopardized.
B)  Both husband and wife must consent if one owns the stock as community property.
C)  An S election requires a consent from all of the S corporation's shareholders.
D)  A consent must be in writing.
E)  None of the above statements is incorrect.F) A) and B)
G) C) and D)

Question 10

An S corporation with substantial AEP has operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000.The passive income penalty tax payable, if any, is:

Accepted Answer

A)  $0.
B)  $40,923.
C)  $116,923.
D)  $136,500.E) B) and D)
F) All of the above

Question 11

What method is used to allocate S corporation income or losses (unless an election to the contrary is made) ?

Accepted Answer

A)  Any method agreed to by all of the shareholders.
B)  Per-day allocation.
C)  FIFO method.
D)  LIFO method.E) All of the above
F) C) and D)

Question 12

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

Accepted Answer

The answer of Bidden, Inc., a calendar year S corporation,...

Question 13

As a general rule, where the S corporation provisions are silent, ____________________ rules apply.

Accepted Answer

The answer of As a general rule, where the S...

Question 14

Passive investment income includes net capital gains from the sale of stocks and securities.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

A two-or-more member LLC operates under partnership tax principles.

Accepted Answer

A) True 
 B)False

Question 17

A capital loss allocated to a shareholder always reduces the Other Adjustments Account.

Accepted Answer

A) True 
 B)False

Question 18

It is not beneficial for an S corporation to issue § 1244 stock.

Accepted Answer

A) True 
 B)False

Question 19

There is no limit on the amount of passive investment income that an S corporation can earn during the year.

Accepted Answer

A) True 
 B)False

Question 20

Which statement is correct with respect to an S corporation?

Accepted Answer

A)  There is no advantage to also elect § 1244 stock.
B)  An S corporation can own 85% of an insurance company.
C)  An estate may be an S shareholder.
D)  A voting trust arrangement is not available.
E)  None of the above statements is correct.F) B) and D)
G) A) and D)

Exam 22: S: Corporations

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

Correct AnswerverifiedShow Answer

Ryan is the sole shareholder of Sweetwater Apartments, an S corporation in Sour Lake, Texas.At a time when his stock basis is $10,000, the corporation distributes appreciated property worth $100,000 (basis of $10,000) .There is no built-in gain.Ryan's taxable gain is:

Correct AnswerverifiedShow Answer

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

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

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During 2012, 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:

Correct AnswerverifiedShow Answer

An S corporation with substantial AEP has operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000.The passive income penalty tax payable, if any, is:

Correct AnswerverifiedShow Answer

There is no limit on the amount of passive investment income that an S corporation can earn during the year.

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Meeting the definition of a small business corporation is a ____________________ requirement for maintaining the S status.

Correct AnswerverifiedShow Answer

An S shareholder's basis in his or her stock can be reduced below zero.

Correct AnswerverifiedShow Answer

A two-or-more member LLC operates under partnership tax principles.

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A capital loss allocated to a shareholder always reduces the Other Adjustments Account.

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What method is used to allocate S corporation income or losses (unless an election to the contrary is made) ?

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It is not beneficial for an S corporation to issue § 1244 stock.

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Passive investment income includes net capital gains from the sale of stocks and securities.

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An S shareholder's stock basis includes a ratable share of any S corporation liabilities.

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

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List some of the separately stated items listed on Schedule K of the Form 1120S.

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As a general rule, where the S corporation provisions are silent, ____________________ rules apply.

Correct AnswerverifiedShow Answer

A cash basis calendar year C corporation reports $100,000 of accounts receivable on the date of its conversion to an S corporation 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.

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Which statement is correct with respect to an S corporation?

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