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Exam 12: S Corporations

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Question 61

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Which statement is correct with respect to filing an S election?

A) Form 2553 must be filed.
B) All shareholders must consent.
C) The election may be filed in the previous year.
D) An extension of time is available for filing Form 2553.
E) All of the above statements are correct.

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

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Question 62

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Claude Bergeron sold 1,000 shares of Ditta, Inc., an S corporation, for $12,000. He had owned the stock for three years and had a stock basis of $111,000 in the shares. Claude is single, and he is the original owner of the § 1244 stock shares. Calculate the appropriate tax treatment.

A) No gain or loss.
B) $50,000 LTCL; $49,000 ordinary deduction.
C) $50,000 ordinary deduction; $49,000 LTCL.
D) $99,000 long-term capital loss.

E) None of the above
F) All of the above

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Question 63

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

Which of these tax provisions does not apply to an S corporation?

You are given the following facts about a 50% owner of an S corporation. Compute her ending stock basis. $\begin{array} { l r } \text { Increase in AAA } & \$ 32,000 \\\text { Increase in } O A A & 6,300 \\\text { Payroll tax penalty } & 2,140 \\\text { Owner's beginning stock basis } & 39,800 \\\text { Tax-exempt interest income } & 4,800 \\\text { Insurance premiums paid (nondeductible) } & 2,700 \\\text { Owner's additional stock purchases } & 22,000\end{array}$ ?

An S corporation's separately stated items generally are identical to those separately stated by _________________________.

Pepper, Inc., an S corporation, holds a $1 million balance in accumulated E&P. It reports sales 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 passive income penalty tax payable, if any?

What statement is correct with respect to an S corporation?

As with partnerships, the income, deductions, and tax credits of an S corporation ____________________ to the shareholders annually.

The LIFO recapture tax is a variation of the passive investment income penalty tax.

Tax-exempt income at the S corporation level flows through as taxable to the shareholder.

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

Which item has no effect on an S corporation's AAA?

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

When an S corporation liquidates, which of its tax attributes disappear?

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:

An S corporation is limited to a theoretical maximum of ____________________ shareholders.

The termination of an S election occurs on the day after a corporation ceases to be a qualifying S corporation.

Form 1120S provides an S shareholder's computation of his or her stock basis.

An S shareholder's stock basis is reduced by flow-through losses before accounting for distributions.