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Exam 22: S: Corporations

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Question 51

Multiple Choice

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

A) Section 1244 stock.
B) "Partial liquidation" stock redemption.
C) Tax-free "A" reorganization.
D) Section 1202 capital gain exclusion.

E) B) and C)
F) All of the above

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Question 52

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

A) Stock purchase by a shareholder.
B) Interest expense.
C) Cost of goods sold.
D) Capital loss.
E) All of the above modify AAA.

F) None of the above
G) All of the above

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Question 53

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An S corporation does not recognize a loss when distributing assets that are worth less than their basis.

A per-day, per-share allocation of flow-through S corporation items must be used, unless the shareholder disposes of the entire interest in the entity.

Estela, Inc., a calendar year S corporation, incurred the following items in 2012. Calculate Estela's nonseparately computed income.

An S corporation can claim a deduction for its NOL carryovers.

If an S corporation excludes cancellation of debt (COD) income from gross income, the excluded amount is applied to _________________ S corporation tax attributes.

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

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

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

An S election is made on the shareholder's Form 1040.

A calendar year C corporation reports a $41,000 NOL in 2011, but it elects S status for 2012 and generates an NOL of $30,000 in that year. At all times during 2012, the stock of the corporation was owned by the same 10 shareholders, each of whom owned 10% of the stock. Kris, one of the 10 shareholders, holds an S stock basis of $2,300 at the beginning of 2012. How much of the 2012 loss, if any, is deductible by Kris?

Samantha owned 1,000 shares in Evita, Inc., an S corporation, that uses the calendar year. On October 11, 2012, Samantha sells all of her Evita stock. Her basis at the beginning of 2012 was $60,000. Her share of the corporate income for 2012 was $22,000, and she receives a distribution of $35,000 between January 1 and October 11, 2012. Her stock basis at the time of the sale is:

Four unrelated individuals acquire assets on behalf of Jump Corporation on May 21, 2012, purchased assets on June 5, 2012, and begin doing business on June 15, 2012.They subscribe to shares of stock, file articles of incorporation for Jump, and become shareholders on July 23, 2012.The S election must be filed no later than 2 1/2 months after:

An S corporation that has total assets of at least $7.5 million on Schedule L at the end of the tax year must file a Schedule M-3.

If an S corporation has C corporate E & P and passive income in excess of ____________________ % of its gross receipts for ____________________ consecutive taxable years, the S election is terminated at the beginning of the ____________________ year. or or

If an S corporation shareholder's basis in a loan to the entity has been _________________, the shareholder recognizes gross income when the S corporation repays the shareholder.

The passive loss limitations apply at the S corporation shareholder level.

Which statement is correct with respect to an S corporation?

An S shareholder's basis is not decreased by distributions treated as being paid from AAA.