Question 1

Oxen Corporation incurs the following transactions.
​

Oxen maintains a valid S election and does not distribute any assets (cash or property)  to its sole shareholder, Megan. As a result, Megan must recognize:

Accepted Answer

A)  Ordinary income of $103,000.
B)  Ordinary income of $103,000 and long-term capital gain of $6,000.
C)  Ordinary income of $103,000, long-term capital gain of $10,000, and $4,000 short-term capital loss.
D)  Ordinary income of $109,000.E) A) and C)
F) None of the above

Question 2

An S corporation with substantial AEP records operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000. The passive income penalty tax payable, if any, is:

Accepted Answer

A)  $0.
B)  $40,923.
C)  $116,923.
D)  $136,500.E) A) and B)
F) C) and D)

Question 3

During 2016, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2015, 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?

Accepted Answer

A)  Nutt recognizes a $1,000 LTCG.
B)  Nutt's stock basis is $2,000.
C)  Nutt's ordinary income is $15,000.
D)  Nutt's tax-free return of capital is $11,000.
E)  None of the above.F) C) and E)
G) A) and B)

Question 4

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

Accepted Answer

$52,600 + $15,000 +....

Question 5

An S corporation may not amortize its organization expenses.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

The answer of In the case of a complete termination...

Question 7

What statement is correct with respect to an S corporation?

Accepted Answer

A)  There are now more LLCs than S corporations.
B)  S corporation status allows shareholders immediately to realize tax benefits from corporate losses.
C)  An S corporation is prohibited from being a member of an affiliated group.
D)  An LLP may own stock in an S corporation.
E)  None of the above statements is correct.F) A) and E)
G) A) and D)

Question 8

Tax-exempt income is not separately stated on Schedule K of Form 1120S.

Accepted Answer

A) True 
 B)False

Question 9

An S shareholder who dies during the S corporation tax year must report his or her share of the pro rata income (loss) items up to the date of death, on the final individual tax return.

Accepted Answer

A) True 
 B)False

Question 10

An S corporation cannot incur a tax liability at the corporation level.

Accepted Answer

A) True 
 B)False

Question 11

Depletion in excess of basis in property causes a(n) ____________________ adjustment to an S shareholder's basis.

Accepted Answer

The answer of Depletion in excess of basis in property...

Question 12

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

Accepted Answer

The major difference involves distributi...

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

An S election is made on the shareholder's Form 2553.

Accepted Answer

A) True 
 B)False

Question 15

Amit, Inc., an S corporation, holds an AAA balance of $614,000 at the beginning of the tax year. During the year, the following items occur.
​

Amit's ending AAA balance is:

Accepted Answer

A)  $1,055,620.
B)  $1,185,150.
C)  $1,191,150.
D)  $1,242,150.
E)  Some other amount.F) A) and E)
G) C) and E)

Question 16

Which, if any, of the following items has no effect on the stock basis of an S corporation shareholder?

Accepted Answer

A)  Operating income.
B)  Long-term capital gain.
C)  Cost of goods sold.
D)  Short-term capital loss.
E)  All of the above affect stock basis.F) A) and B)
G) C) and E)

Question 17

Any losses that are suspended under the at-risk rules are carried forward and are available during an S corporation's post-termination period.

Accepted Answer

A) True 
 B)False

Question 18

All tax preference items flow through the S corporation, to be included in the shareholders' AMT calculations.

Accepted Answer

A) True 
 B)False

Question 19

Compensation for services rendered to an S corporation is subject to FICA taxes.

Accepted Answer

A) True 
 B)False

Question 20

Which statement is incorrect with respect to an S shareholder's consent?

Accepted Answer

A)  A consent extension is available only if Form 2553 is filed on a timely basis, reasonable cause is given, and the interests of the government are not jeopardized.
B)  Both husband and wife must consent if one owns the stock as community property.
C)  An S election requires a consent from all of the S corporation's shareholders.
D)  A consent must be in writing.
E)  None of the above statements is incorrect.F) B) and D)
G) A) and E)

Exam 15: S Corporations

An S corporation with substantial AEP records operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000. The passive income penalty tax payable, if any, is:

Correct AnswerverifiedShow Answer

Oxen Corporation incurs the following transactions. ​ Oxen maintains a valid S election and does not distribute any assets (cash or property) to its sole shareholder, Megan. As a result, Megan must recognize:

Correct AnswerverifiedShow Answer

An S corporation cannot incur a tax liability at the corporation level.

Correct AnswerverifiedShow Answer

Depletion in excess of basis in property causes a(n) ____________________ adjustment to an S shareholder's basis.

Correct AnswerverifiedShow Answer

Compensation for services rendered to an S corporation is subject to FICA taxes.

Correct AnswerverifiedShow Answer

Amit, Inc., an S corporation, holds an AAA balance of $614,000 at the beginning of the tax year. During the year, the following items occur. ​ Amit's ending AAA balance is:

Correct AnswerverifiedShow Answer

An S election is made on the shareholder's Form 2553.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Any losses that are suspended under the at-risk rules are carried forward and are available during an S corporation's post-termination period.

Correct AnswerverifiedShow Answer

During 2016, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2015, 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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which, if any, of the following items has no effect on the stock basis of an S corporation shareholder?

Correct AnswerverifiedShow Answer

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

Correct Answerverified$52,600 + $15,000 +....View AnswerShow Answer

An S corporation may not amortize its organization expenses.

Correct AnswerverifiedShow Answer

An S shareholder who dies during the S corporation tax year must report his or her share of the pro rata income (loss) items up to the date of death, on the final individual tax return.

Correct AnswerverifiedShow Answer

What statement is correct with respect to an S corporation?

Correct AnswerverifiedShow Answer

Which statement is incorrect with respect to an S shareholder's consent?

Correct AnswerverifiedShow Answer

All tax preference items flow through the S corporation, to be included in the shareholders' AMT calculations.

Correct AnswerverifiedShow Answer

Tax-exempt income is not separately stated on Schedule K of Form 1120S.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe major difference involves distributi...View AnswerShow Answer

Correct Answer
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Oxen Corporation incurs the following transactions. Oxen maintains a valid S election and does not distribute any assets (cash or property) to its sole shareholder, Megan. As a result, Megan must recognize:

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Amit, Inc., an S corporation, holds an AAA balance of $614,000 at the beginning of the tax year. During the year, the following items occur. Amit's ending AAA balance is:

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$52,600 + $15,000 +....
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The major difference involves distributi...
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