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Exam 22: S Corporations

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Question 51

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Most IRAs can own stock in an S corporation.

A) True
B) False

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Question 52

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Identify a disadvantage of an S corporation.

A) Generally,trusts cannot be shareholders.
B) Losses flow through to the shareholders.
C) The AMT on corporations is avoided.
D) Tax-exempt income flows through to the shareholders.
E) None of the above is a disadvantage of the S election.

F) C) and E)
G) A) and D)

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Question 53

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Crew Corporation elects S status effective for tax year 2010.As of January 1,2010,Crew's assets were appraised as follows. In each of the following situations,calculate any built-in gains tax,assuming that the highest corporate tax rate is 35%.C corporation taxable income would have been $100,000.

Which statement is incorrect?

All items (e.g. ,income,losses)are allocated to each shareholder based upon ____________________ ownership throughout the year.

Shareholders may deduct losses in excess of the basis in S corporation stock when shareholder does not have a loan basis.

A cash basis calendar year C corporation in Athens,Georgia,has $100,000 of accounts receivable on the date of its conversion to an S corporation on February 14.By the end of the year,$70,000 of these receivables are collected.Calculate any built-in gains tax,assuming that there is sufficient taxable income.

Explain the OAA concept in S corporation taxation.

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

Estela,Inc. ,a calendar year S corporation,incurred the following items in 2010. Calculate Estela's nonseparately computed income.

If the beginning balance in OAA is $3,900,and the following transactions occur,what is the ending OAA balance?

In the case of a complete termination of an S corporation interest,a ____________________ tax year may occur.

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

S corporation provides many of the benefits of ____________________ taxation and at the same time gives the owners ____________________ protection from creditors.

Compare the distribution of property rules for an S corporation with the corresponding partnership rules.

Any excess of S corporation losses or deductions over the shareholder's combined stock and debt basis is suspended until there is a subsequent stock or debt basis.

An S election made before becoming a corporation is valid the next 22-month tax year.

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

Non-separately computed loss ____________________ a S shareholder's stock basis.

On January 1,Bobby and Alice own equally all of the stock of an electing S corporation called Prairie Dirt Delight.The soil company has a $90,000 loss for a non-leap year.On the 219th day of the year,Bobby sells his one-half of the stock to his son,Naresh.How much of the $90,000 loss is allocated to Alice?