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Exam 12: S Corporations

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Question 1

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An S corporation must possess which of the following characteristics?

A) Not more than one hundred shareholders.
B) Corporation organized in the U.S.
C) Only one class of stock.
D) All of the above are required of an S corporation.
E) None of the above are required of an S corporation.

F) None of the above
G) A) and E)

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Question 2

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Tax-exempt income at the corporate level flows through as exempt to S shareholders.

A) True
B) False

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Question 3

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

If an S corporation's beginning balance in OAA is zero, and the following transactions occur, what is the ending OAA balance? ​

An S corporation reports a recognized built-in gain of $110,000 and taxable income of $98,000. The company carries an $8,000 NOL carryforward from a C corporation year, and a $7,000 business credit carryforward from a C corporation year. The built-in gains tax liability is:

During 2015, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2014, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?

You are a 60% owner of an S corporation. Calculate your ending stock basis, based upon these facts.

Liabilities affect the owner's basis differently in an S corporation than they do in a partnership.

S corporations are treated as partnerships under state property laws.

Samantha owned 1,000 shares in Evita, Inc., an S corporation, that uses the calendar year. On October 11, 2015, Samantha sells all of her Evita stock. Her basis at the beginning of 2015 was $60,000. Her share of the corporate income for 2015 was $22,000, and she receives a distribution of $35,000 between January 1 and October 11, 2015. Her stock basis at the time of the sale is:

An item that appears in the "Other Adjustments Account" affects stock basis, but not AAA, such as tax-exempt interest.

Most IRAs cannot own stock in an S corporation.

Discuss two ways that an S election may be terminated.

An estate may be a shareholder of an S corporation.

An S corporation that has total assets of at least $10 million on Schedule L at the end of the tax year must file a Schedule M-3.

On January 1, 2015, Kinney, Inc., an electing S corporation, holds $5,000 of AEP and $9,000 in AAA. Kinney has two shareholders, Eric and Maria, each of whom owns 500 shares of Kinney's stock. Kinney's 2015 taxable income is $6,000. Kinney distributes $6,000 to each shareholder on February 1, 2015, and distributes another $3,000 to each shareholder on September 1. How is Erin taxed on the distribution?

Which tax provision does not apply to an S corporation?

Randall owns 800 shares in Fabrication, Inc., an S corporation in Moss Hill, Texas. In 2015, the basis in his stock is $30,000, before the adjustment for this year's losses. During 2015, Randall's share of the corporation's ordinary loss is $20,000, and his share of its capital loss is $15,000. How much can Randall deduct due to these losses?

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

Which statement is incorrect with respect to the number-of-shareholders test in filing an S election?