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Exam 15: S Corporations

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Question 51

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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) B) and C)
G) A) and B)

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Question 52

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Which statement is incorrect?

A) S corporations are treated as corporations under state law.
B) S corporations are treated as partnerships for Federal income tax purposes.
C) Distributions of appreciated property are taxable to the S corporation.
D) None of the above statements is incorrect.

E) None of the above
F) B) and C)

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Question 53

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

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

A distribution of cash or other property by an S corporation to shareholders that does not exceed the balance of AAA during a one-year period following an S election termination receives special capital gain treatment.

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

A capital loss allocated to a shareholder always reduces the Other Adjustments Account.

Any distribution made by an S corporation during a tax year is taken into account before accounting for the year's losses.

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?

The amount of any distribution to an S corporation shareholder is equal to the ____________________ plus the fair market value of any other property distributed.

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

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:

Stock basis first is increased by income items,then ____________________ by distributions,and finally decreased by ____________________.

Identify a disadvantage of being an S corporation.

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.

An S shareholder's basis is increased by stock purchases and capital contributions.

As with partnerships,the income,deductions,and tax credits of an S corporation ____________________ to the shareholders annually.

The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

The maximum number of actual shareholders in an S corporation 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?