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Exam 12: S Corporations

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Question 21

Multiple Choice

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Mock Corporation converts to S corporation status in 2020. Mock used the LIFO inventory method in 2019 and had a LIFO inventory of $435,000 FIFO value of $550,000) on the date of the S election. How much tax must be added to Mock's 2019 corporate tax liability, assuming that Mock is subject to a 21% tax rate.

A) $-0-
B) $6,038
C) $24,150
D) $115,000

E) C) and D)
F) A) and B)

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Question 22

Multiple Choice

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A calendar year C corporation reports a $41,000 NOL in 2019, but it elects S status for 2020 and generates an NOL of $30,000 in that year. At all times during 2020, 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 2020. How much of the 2020 loss, if any, can she deduct?

A) $-0-
B) $2,300
C) $3,000
D) $7,100

E) A) and B)
F) C) and D)

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Question 23

Multiple Choice

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Donna and Mark are married and file a joint return reporting taxable income of $350,000. Donna owns a qualified S corporation that is not a specified service business. During the year, she incurs qualified business income of $75,000. Donna's share of wages paid by the business is $20,000. Assuming there is no qualified property factor, calculate her 20% QBI deduction.

Persons who were S shareholders during any part of the year before the election date but were not shareholders when the election was made also must consent to an S election.

On January 1, Bobby and Alice equally own all of the stock of an electing S corporation called Prairie Dirt Delight. The entity incurs a $60,000 loss for a nonleap year. On the 200th day of the year not a leap year) , Bobby sells his one-half of the stock to his son, Saul. How much of the $60,000 loss, if any, is allocated to Bobby?

This year, Jiang, the sole shareholder of a calendar year S corporation, received a distribution of $17,000. On December 31 of the prior year, his stock basis was $3,000. The corporation earned $12,000 ordinary income during the year. It has no accumulated E&P. Which statement is correct? Ignore the 20% QBI deduction.

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:

Separately stated items are listed on Schedule________ of the Form 1120S.

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?

Where the S corporation rules are silent, C corporation provisions apply.

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

Pass-through S corporation losses can reduce the basis in a shareholder's loan to the entity, but distributions do not reduce loan basis.

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

A new S corporation shareholder can revoke the S election unilaterally, if he or she owns how much of the existing S corporation's stock?

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

Discuss two ways that an S election may be terminated.

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

Lent Corporation converts to S corporation status in 2019. Lent had been using the LIFO inventory method and held a LIFO inventory value of $510,000 FIFO value of $650,000) . How much tax must be added to the C corporation tax liability for the year before the S election in 2020?

A corporation can revoke its S election as of a future date.