Question 1

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

Accepted Answer

A)   Depletion deductions in excess of the basis of property.
B)   Illegal kickbacks paid.
C)   Nontaxable income.
D)   Sales.E) A) and B)
F) None of the above

Question 2

The § 1202 exclusion of gain is not available on disposition of S corporation stock.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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.

Accepted Answer

A)   $0
B)   $10,000
C)   $21,000
D)   $35,000
E)   Some other amountF) None of the above
G) A) and E)

Question 5

An S shareholder's stock basis can be reduced below zero.

Accepted Answer

A) True 
 B)False

Question 6

A distribution from OAA is taxable.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)   Net sales.
B)   Cost of goods sold.
C)   Dividends received.
D)   Depreciation recapture.E) C) and D)
F) A) and B)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Distributions of appreciated property by an S corporation are not taxable to the entity.

Accepted Answer

A) True 
 B)False

Question 12

For a new corporation, a premature S election may not be effective.

Accepted Answer

A) True 
 B)False

Question 13

If any entity electing S status is currently a C corporation, NOL carryovers from prior years ____________________ be used in an S corporation year.

Accepted Answer

The answer of If any entity electing S status is...

Question 14

On January 2, 2014, Tim loans his S corporation $10,000. By the end of 2014, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000. During 2015, the company's operating income is $10,000. The company makes 2015 distributions to Tim of $8,000. Tim reports a(n) :

Accepted Answer

A)   $2,000 LTCG.
B)   $8,000 LTCG.
C)   Stock basis of $2,000.
D)   Loan basis of $10,000.E) A) and C)
F) C) and D)

Question 15

An S corporation with substantial AEP records 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) None of the above
F) B) and C)

Exam 12: S Corporations

If any entity electing S status is currently a C corporation, NOL carryovers from prior years ____________________ be used in an S corporation year.

Correct Answer
verified

On January 2, 2014, Tim loans his S corporation $10,000. By the end of 2014, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000. During 2015, the company's operating income is $10,000. The company makes 2015 distributions to Tim of $8,000. Tim reports a(n) :

Correct Answer
verified

A distribution from OAA is taxable.

Correct Answer
verified

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

Correct Answer
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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.

Correct Answer
verified

Distributions of appreciated property by an S corporation are not taxable to the entity.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

An S shareholder's stock basis can be reduced below zero.

Correct Answer
verified

For a new corporation, a premature S election may not be effective.

Correct Answer
verified

The § 1202 exclusion of gain is not available on disposition of S corporation stock.

Correct Answer
verified

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

Correct Answer
verified

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.

Correct Answer
verified

An S corporation with substantial AEP records 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 Answer
verified

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

Correct Answer
verified

Exam 12: S Corporations

If any entity electing S status is currently a C corporation, NOL carryovers from prior years ____________________ be used in an S corporation year.

Correct AnswerverifiedShow Answer

On January 2, 2014, Tim loans his S corporation $10,000. By the end of 2014, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000. During 2015, the company's operating income is $10,000. The company makes 2015 distributions to Tim of $8,000. Tim reports a(n) :

Correct AnswerverifiedShow Answer

A distribution from OAA is taxable.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Distributions of appreciated property by an S corporation are not taxable to the entity.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An S shareholder's stock basis can be reduced below zero.

Correct AnswerverifiedShow Answer

For a new corporation, a premature S election may not be effective.

Correct AnswerverifiedShow Answer

The § 1202 exclusion of gain is not available on disposition of S corporation stock.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

An S corporation with substantial AEP records 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

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

Correct AnswerverifiedShow Answer

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