Question 1

If shareholders have high marginal rates relative to C corporation rates,it may be desirable to ________________ S corporation status.

Accepted Answer

The answer of If shareholders have high marginal rates relative...

Question 2

_________________ taxation rules do not apply to an S corporation.

Accepted Answer

The answer of _________________ taxation rules do not apply to...

Question 3

Estela,Inc.,a calendar year S corporation,incurred the following items in 2008.
  
Calculate Estela's nonseparately computed income.

Accepted Answer

The answer of Estela,Inc.,a calendar year S corporation,incurred the following...

Question 4

Pepper,Inc.,an S corporation in Norfolk,Virginia,has revenues of $400,000,taxable interest of $380,000,operating expenses of $250,000,and deductions attributable to the interest income of $140,000.What is Pepper's § 1375 penalty tax payable?

Accepted Answer

A)  $0.
B)  $40,895.
C)  $185,000.
D)  $380,000.
E)  Some other amount.F) A) and B)
G) All of the above

Question 5

What statement is correct with respect to an S corporation?

Accepted Answer

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

Question 6

S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).

Accepted Answer

A) True 
 B)False

Question 7

Which,if any,of the following items has no effect on the stock basis of an S corporation shareholder?

Accepted Answer

A)  Operating income.
B)  Long-term capital gain.
C)  Cost of goods sold.
D)  Short-term capital loss.
E)  All of the above affect stock basis.F) A) and E)
G) C) and E)

Question 8

An S election is made on Form 2550.

Accepted Answer

A) True 
 B)False

Question 9

Liabilities affect the owner's basis differently in an S corporation versus a partnership.

Accepted Answer

A) True 
 B)False

Question 10

An S corporation in Polly Beach,South Carolina,reports a recognized built-in gain of $95,000 and taxable income of $80,000.It holds a $7,000 NOL carryforward and a $9,000 business credit carryforward from a C corporation year.There are no earnings and profits from C corporation years.The built-in gains tax liability is:

Accepted Answer

A)  $0.
B)  $16,550.
C)  $25,550.
D)  $28,000.
E)  None of the above.F) A) and C)
G) A) and D)

Question 11

Distributions are made from OAA after AEP and AAA reach zero.

Accepted Answer

A) True 
 B)False

Question 12

On January 1,2008,Kinney,Inc.,an electing S corporation,has $4,000 of AEP and a balance of $10,000 in AAA.Kinney has two shareholders,Erin and Maine,each of whom owns 500 shares of Kinney's stock.Kinney's 2008 taxable income is $5,000.Kinney distributes $6,000 to each shareholder on February 1,2008,and distributes another $3,000 to each shareholder on September 1.How is Erin taxed on this distribution?

Accepted Answer

A)  $500 dividend income.
B)  $1,000 dividend income.
C)  $1,500 dividend income.
D)  $3,000 dividend income.
E)  None of the above.F) A) and C)
G) A) and D)

Question 13

Since only ____________________ distributions reduce AAA during the post-election termination period,a corporation should not make ____________________ distributions during this time.

Accepted Answer

The answer of Since only ____________________ distributions reduce AAA during...

Question 14

In certain circumstances,an S shareholder's basis in her S stock can be reduced below zero.

Accepted Answer

A) True 
 B)False

Question 15

Excess net passive income of an S corporation is $40,000 and taxable income is $32,000.Assuming that there is $50,000 of accumulated earnings and profits from a C corporation year,calculate any passive income penalty tax.

Accepted Answer

A)  $0.
B)  $4,500.
C)  $10,500.
D)  $11,200.
E)  Some other amount.F) B) and E)
G) D) and E)

Question 16

Since loss property receives a ____________________ - ____________________ in basis without any loss recognition,distributions of loss property should be ____________________.

Accepted Answer

The answer of Since loss property receives a ____________________ -...

Question 17

Tax-exempt income at the S level loses its special tax treatment for the shareholder.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)  Taxable dividends.
B)  Stock dividend (taxable) .
C)  Section 1250 gain.
D)  Tax-exempt income.
E)  None of the above.F) A) and C)
G) A) and D)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Payment of an illegal kickback would increase a shareholder's stock basis.

Accepted Answer

A) True 
 B)False

Exam 12: S Corporations

_________________ taxation rules do not apply to an S corporation.

Correct Answer
verified

Liabilities affect the owner's basis differently in an S corporation versus a partnership.

Correct Answer
verified

If shareholders have high marginal rates relative to C corporation rates,it may be desirable to ________________ S corporation status.

Correct Answer
verified

Correct Answer
verified

What statement is correct with respect to an S corporation?

Correct Answer
verified

Since only distributions reduce AAA during the post-election termination period,a corporation should not make distributions during this time.

Correct Answer
verified

Excess net passive income of an S corporation is $40,000 and taxable income is $32,000.Assuming that there is $50,000 of accumulated earnings and profits from a C corporation year,calculate any passive income penalty tax.

Correct Answer
verified

An S election is made on Form 2550.

Correct Answer
verified

Which,if any,of the following items has no effect on the stock basis of an S corporation shareholder?

Correct Answer
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Correct Answer
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In certain circumstances,an S shareholder's basis in her S stock can be reduced below zero.

Correct Answer
verified

Estela,Inc.,a calendar year S corporation,incurred the following items in 2008. Calculate Estela's nonseparately computed income.

Correct Answer
verified

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

Correct Answer
verified

Tax-exempt income at the S level loses its special tax treatment for the shareholder.

Correct Answer
verified

S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).

Correct Answer
verified

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

Correct Answer
verified

Distributions are made from OAA after AEP and AAA reach zero.

Correct Answer
verified

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

Correct Answer
verified

Payment of an illegal kickback would increase a shareholder's stock basis.

Correct Answer
verified

Pepper,Inc.,an S corporation in Norfolk,Virginia,has revenues of $400,000,taxable interest of $380,000,operating expenses of $250,000,and deductions attributable to the interest income of $140,000.What is Pepper's § 1375 penalty tax payable?

Correct Answer
verified

Exam 12: S Corporations

_________________ taxation rules do not apply to an S corporation.

Correct AnswerverifiedShow Answer

Liabilities affect the owner's basis differently in an S corporation versus a partnership.

Correct AnswerverifiedShow Answer

If shareholders have high marginal rates relative to C corporation rates,it may be desirable to ________________ S corporation status.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What statement is correct with respect to an S corporation?

Correct AnswerverifiedShow Answer

Since only ____________________ distributions reduce AAA during the post-election termination period,a corporation should not make ____________________ distributions during this time.

Correct AnswerverifiedShow Answer

Excess net passive income of an S corporation is $40,000 and taxable income is $32,000.Assuming that there is $50,000 of accumulated earnings and profits from a C corporation year,calculate any passive income penalty tax.

Correct AnswerverifiedShow Answer

An S election is made on Form 2550.

Correct AnswerverifiedShow Answer

Which,if any,of the following items has no effect on the stock basis of an S corporation shareholder?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In certain circumstances,an S shareholder's basis in her S stock can be reduced below zero.

Correct AnswerverifiedShow Answer

Estela,Inc.,a calendar year S corporation,incurred the following items in 2008. Calculate Estela's nonseparately computed income.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Tax-exempt income at the S level loses its special tax treatment for the shareholder.

Correct AnswerverifiedShow Answer

S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Distributions are made from OAA after AEP and AAA reach zero.

Correct AnswerverifiedShow Answer

Since loss property receives a ____________________ - ____________________ in basis without any loss recognition,distributions of loss property should be ____________________.

Correct AnswerverifiedShow Answer

Payment of an illegal kickback would increase a shareholder's stock basis.

Correct AnswerverifiedShow Answer

Pepper,Inc.,an S corporation in Norfolk,Virginia,has revenues of $400,000,taxable interest of $380,000,operating expenses of $250,000,and deductions attributable to the interest income of $140,000.What is Pepper's § 1375 penalty tax payable?

Correct AnswerverifiedShow Answer

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Since only distributions reduce AAA during the post-election termination period,a corporation should not make distributions during this time.

Correct Answer
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Since loss property receives a - in basis without any loss recognition,distributions of loss property should be .

Correct Answer
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Correct Answer
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