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Question;1295. #1;Which statement is false?;a.;S corporations are treated as corporations under state law.;b. The alternative minimum tax applies;to an S corporation.;c. Liabilities affect S shareholders;differently than partners.;d. S corporations may not allocate;income like partnerships.;e. None of the above.;1296. #2;An S corporation may be subject to the following tax;a.;Corporation income tax (? 11).;b. Passive investment income tax.;c. Alternative minimum tax.;d. None of the above applies to S;corporations.;1297. #3;Which statement is false?;a.;S corporation status provides many of the benefits of partnership treatment.;b. S corporation shareholders have;limited liability.;c. Distributions of appreciated assets;are nottaxable in an S corporation.;d. The personal holding company tax does;not apply to an S corporation.;e. None of the above.;1298. #4;Which statement is false?;a.;Partnership taxation rules do not apply to S corporations.;b. A two-or-more member LLC operates;under partnership principles.;c. All income of an S corporation flows;through to the S shareholders.;d. S shareholders may use their;proportionate shares of NOLs currently.;e. None of the above.;1299. #5;Which statement is true?;a.;Charitable contributions are subject to the 10% limitation at the corporate;level.;b. The at-risk rules apply to S;corporations.;c. The passive loss limitations do not;apply to S corporations.;d. S corporations are exempted from;state and local taxes.;e. None of the above.;1300. #6;An S corporation must possess the following characteristic(s);a.;No more than 100 shareholders.;b. Corporation organized in the U.S.;c. Only one class of stock.;d. All of the above are required of S;corporations.;e. None of the above is required for S;corporations.;1301. #7;Which is ineligible to be an S shareholder?;a.;Individual.;b. Estate.;c. Partnership.;d. Spouse of a nonresident alien (common;law state).;e. None of the above.;1302. #8;Identify a disadvantage of S corporation status.;a.;Most trusts can be shareholders.;b. Losses flow through to the;shareholders.;c. The ACE adjustment is avoided.;d. Tax-exempt income flows through to;the shareholders.;e. None of the above is a disadvantage;of the S election.;1303. #9;Which, if any, of the following can be an eligible shareholder of an S;corporation?;a.;A resident alien.;b. Limited liability company.;c. A foreign corporation.;d. A Roth IRA.;e. None of the above can own S;corporation stock.;1304. #10;Which, if any, of the following is not an eligible shareholder of an S;corporation?;a.;A child, age 9.;b. Spouse of a nonresident alien in a;community property state.;c. A voting trust.;d. An estate of a deceased shareholder.;e. All of the above can own S;corporation stock.;1305. #11;Which event will not terminate an S;election?;a.;Receipt of passive income.;b. Share of stock given to a nonresident;alien.;c. Shares of stock given to a;corporation.;d. A second class of stock issued.;e. All of the above terminate an;election.;1306. #12;Which could constitute a second class of stock under the S corporation rules?;a.;Treasury stock.;b. Phantom stock.;c. Unexercised stock options.;d. Warrants.;e. None of the above.;1307. #13;Which could constitute a second class of stock under the S corporation rules?;a.;Unissued stock.;b. Treasury stock.;c. Stock appreciation rights.;d. Convertible debentures.;e. None of the above.;1308. #14;Which statement is incorrect with respect to filing for an S election?;a.;Form 2553 must be filed.;b. All shareholders must consent.;c. The election may be filed in the;previous year.;d. An extension of time is available for;filing Form 2553.;e. None of the above are incorrect.;1309. #15;Several individuals acquire assets on behalf of Skip Corporation on May 28;2011, purchased assets on June 3, 2011, and begin doing business on June 11;2011. They subscribe to shares of stock, file articles of incorporation for;Skip, and become shareholders on June 21, 2011. The S election must be filed no;later than 2 1/2 months after;a.;May 28, 2011.;b. June 3, 2011.;c. June 11, 2011.;d. June 21, 2011.;e. December 31, 2011.;1310. #16;The maximum number of S shareholders is;a.;75.;b. 100.;c. 200.;d. Some other fixed amount.;e. Indeterminable.;1311. #17;Which statement is incorrectwith;respect to an S shareholder?s consent?;a.;An S election requires a consent from all of the S corporation?s shareholders.;b. Both husband and wife must consent if;one owns the stock as community property.;c. 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.;d. A consent must be in writing.;e. None of the above statements is;incorrect.;1312. #18;Which item does not appear on;Schedule K of Form 1120S?;a.;Tax-exempt interest income.;b. Depreciation recapture income.;c. Section 179 expense deduction.;d. Section 1231 loss.;e. All of the above appear on Schedule;K.;1313. #19;Which item does not appear in an S;corporation?s nonseparately computed income?;a.;Net sales.;b. Tax-exempt income.;c. Cost of goods sold.;d. Depreciation recapture.;e. All of the above appear.;1314. #20;Which item does not appear on;Schedule K of Form 1120S?;a.;Intangible drilling costs.;b. Foreign loss.;c. Recovery of a tax benefit.;d. Interest expense.;e. All of the above appear on Schedule;K.;1315. #21;What method is automatically used to allocate income or losses (unless an;election is made)?;a.;Short-year method.;b. Long-year method.;c. Per-day allocation.;d. FIFO method.;e. LIFO method.;1316. #22;Which item has no effect on an S corporation?s AAA?;a.;Capital loss.;b. Administrative expenses.;c. Cost of goods sold.;d. Stock purchase by a shareholder.;e. All of the above modify AAA.;1317. #23;Which type of distribution from an S corporation is taxed at the 0/15% Federal;income tax rate?;a.;AAA.;b. Nonseparately computed income.;c. OAA.;d. AEP.;e. None of the above.;1318. #24;Which transaction affects the Other Adjustments Account on an S corporation?s;Schedule M-2?;a.;Taxable dividends.;b. Stock dividend (taxable).;c. Depreciation recapture income.;d. Tax-exempt income.;e. None of the above.;1319. #25;Which transaction affects the Other Adjustments Account on an S corporation?s;Schedule M-2?;a.;Charitable contributions.;b. Unreasonable compensation.;c. Payroll tax penalty assessed.;d. Domestic production activities;deduction.;e. None of the above.;1320. #26;Beginning in 2011, the AAA of Ewing, Inc., an S corporation, has a balance of;$725,000. During the year, the following items occur.;Operating income;$472,000;Interest income;6,500;Dividend income;14,050;Municipal bond interest income;6,000;Long-term capital loss from sale of investment land;7,400;Charitable contributions;19,000;Cash distributions to shareholders;57,000;Ewing?s ending AAA balance is;a.;$1,153,150.;b. $1,134,150.;c. $1,127,650.;d. $1,126,750.;1321. #27;How large must total assets on Schedule L be at the end of the year for an S;corporation to be required to file Schedule M-3?;a.;$4 million.;b. $5 million.;c. $7.5 million.;d. $10 million.;e. Not required to file.;1322. #28;Distributions of which assets during an S corporation?s post-termination period;receive favorable income tax treatment?;a.;Cash.;b. Automobile.;c. Real estate.;d. Notes receivable.;e. All of the above.;1323. #29;During 2011, Dana Rippel, the sole shareholder of a calendar year S;corporation, received a distribution of $16,000. On December 31, 2010, her;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?;a.;Rippel recognizes a $1,000 LTCG.;b. Rippel?s stock basis will be $2,000.;c. Rippel?s ordinary income is $15,000.;d. Rippel?s return of capital is;$11,000.;e. None of the above.;1324. #30;On January 1, 2011, Zundel, Inc., an electing S corporation, has $4,000 of AEP;and a balance of $10,000 in AAA. Zundel has two shareholders, Erin and Maine;each of whom owns 500 shares of Zundel?s stock. Zundel?s 2011 taxable income is;$5,000. Zundel distributes $6,000 to each shareholder on February 1, 2011, and;distributes another $3,000 to each shareholder on September 1. How is Erin;taxed on this distribution?;a.;$500 dividend income.;b. $1,000 dividend income.;c. $1,500 dividend income.;d. $3,000 dividend income.;e. None of the above.;1325. #31;Ryan is the sole shareholder of Sweetwater Apartments, an S corporation in Sour;Lake, Texas. At a time when his stock basis is $10,000, the corporation;distributes appreciated property worth $100,000 (basis of $10,000). There is no;built-in gain. Ryan?s taxable gain is;a.;$0.;b. $10,000.;c. $90,000.;d. $100,000.;e. None of the above.;1326. #32;Which, if any, of the following items has no;effect on the stock basis of an S corporation shareholder?;a.;Net sales.;b. Long-term capital gain.;c. Cost of goods sold.;d. Short-term capital loss.;e. A mortgage taken by the S;corporation.;1327. #33;You are given the following facts about a one-shareholder S corporation, and;you are asked to prepare the shareholder?s ending stock basis.;Ordinary income;$100,000;Payroll tax penalty;2,140;Stock purchases;32,000;Domestic production activities deduction;18,500;Tax-exempt insurance proceeds;49,000;Insurance premiums paid (nondeductible);2,700;Beginning stock basis;38,800;a.;$168,660.;b. $170,800.;c. $214,960.;d. $263,960.;1328. #34;Samantha owned 1,000 shares in Evita, Inc., an S corporation, that uses the;calendar year. On October 11, 2011, Samantha sells all of her Evita stock. Her;basis at the beginning of 2011 was $60,000. Her share of the corporate income;for 2011 was $22,000, and she receives a distribution of $37,000 between;January 1 and October 11, 2011. Her stock basis at the time of the sale is;a.;$45,000.;b. $60,000.;c. $75,000.;d. $82,000.;e. Some other answer.;1329. #35;You are given the following facts about a 40% owner of an S corporation, and;you are asked to prepare her ending stock basis.;Increase in AAA;$32,000;Increase in OAA;6,300;Payroll tax penalty;2,140;Ending PTI;6,125;Beginning stock basis;36,800;Tax-exempt interest income;4,800;Insurance premiums paid (nondeductible);2,700;Stock purchases;22,000;a.;$77,950.;b. $82,750.;c. $97,100.;d. $103,225.;e. Some other answer.;1330. #36;On January 2, 2010, David loans his S corporation $10,000, and by the end of;2010 David?s stock basis is zero and the basis in his note has been reduced to;$8,000. During 2011, the company?s operating income is $10,000. The company;also makes distributions to David of $11,000. Which statement is correct?;a.;$1,000 LTCG.;b. $3,000 LTCG.;c. $11,000 LTCG.;d. Loan basis is $10,000.;e. None of the above statements is;correct.;1331. #37;On January 2, 2010, Tim loans his S corporation $10,000. By the end of 2010;Tim?s stock basis is zero, and the basis in his note has been reduced to;$8,000. During 2011, the company?s operating income is $10,000. The company;also makes distributions to Tim of $8,000. Which statement is correct?;a.;Loan basis is now $10,000.;b. $8,000 LTCG.;c. Stock basis is $2,000.;d. $2,000 LTCG.;e. None of the above statements is;correct.;1332. #38;Randall owns 800 shares in Fabrication, Inc., an S corporation in Moss Hill;Texas. In 2011, his basis in his stock is $30,000, before the adjustment for;this year?s losses. During 2011, 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?;a.;None.;b. $15,000 ordinary loss, $10,000;capital loss.;c. $17,143 ordinary loss, $12,857;capital loss.;d. $20,000 ordinary loss, $15,000;capital loss.;e. Some other amounts.;1333. #39;During 2011, Oxen Corporation incurs the following transactions.;Net income from operations;$100,000;Interest income from savings account;3,000;Long-term capital gain from sale of securities;10,000;Short-term capital loss from sale of securities;4,000;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;a.;Ordinary income of $103,000 and long-term capital gain of $5,000.;b. Ordinary income of $103,000;long-term capital gain of $10,000, and $4,000 short-term capital loss.;c. Ordinary income of $108,000.;d. None of the above.;1334. #40;On January 1, Bobby and Alice own equally all of the stock of an electing S;corporation called Prairie Dirt Delight. The dirt company has a $60,000 loss;for a non-leap year. On the 200th day of the 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?;a.;$0.;b. $13,562.;c. $16,438.;d. $32,877.;e. None of the above.;1335. #41;A calendar year C corporation has a $41,000 NOL in 2010, but it elects S status;for 2011 and generates an NOL of $30,000 in 2011. At all times during 2011, 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, has an S stock basis;of $2,300 at the beginning of 2011. How much of the loss, if any, is deductible;by Kris in 2011?;a.;None.;b. $2,300.;c. $3,000.;d. $7,100.;1336. #42;An S corporation in Lawrence, Kansas has a recognized built-in gain of $110,000;and taxable income of $98,000. The company has 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;a.;$0.;b. $24,500.;c. $28,700.;d. $31,500.;e. None of the above.;1337. #43;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.;a.;$0.;b. $10,500.;c. $24,500.;d. $35,000.;e. Some other amount.;1338. #44;Lott Corporation in Macon, Georgia converts to S corporation status in 2011.;Lott used the LIFO inventory method in 2010 and had a LIFO inventory of;$420,000 (FIFO value of $550,000). How much tax must be added to the 2010;corporate tax liability, assuming that Lott is subject to a 35% tax rate.;a.;$0.;b. $11,375.;c. $45,500.;d. $130,000.;e. None of the above.;1339. #45;Pepper, Inc., an S corporation in Norfolk, Virginia, has 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?;a.;$0.;b. $40,895.;c. $185,000.;d. $380,000.;e. Some other amount.;1340. #46;Claude Bergeron sold 1,000 shares of Ditta, Inc., an S corporation located in;Concord, North Carolina, for $12,000. He had owned the stock for three years;and had a stock basis of $111,000 in the shares. Claude is single, and he is;the original owner of the ? 1244 stock shares. Calculate the appropriate tax;treatment of any gain or loss.;a.;No gain or loss.;b. $50,000 LTCL, $49,000 ordinary;deduction.;c. $50,000 ordinary deduction, $49,000;LTCL.;d. $99,000 long-term capital loss.;e. None of the above.;1341. #47;Yates Corporation elects S status, effective for calendar year 2011. Yates?;only asset has a basis of $50,200 and a fair market value of $110,400 as of;January 1, 2011. The asset is sold at the end of 2011 for $130,800. What amount;must Mark Farris, a 60% owner and subject to a 15% income tax rate, pay, if any?;a.;$5,358.;b. $12,642.;c. $21,070.;d. $35,718.;e. None of the above.;1342. #48;An S corporation with substantial AEP has 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;a.;$0.;b. $40,923.;c. $116,923.;d. $136,500.;e. None of the above.;1343. #49;Which tax provision does notapply to an S corporation?;a.;Hobby loss rule.;b. Section 1244 stock.;c. Penalty for failure to file.;d. 10% charitable contribution;limitation.;e. Estimated tax payments.;1344. #50;Which of these tax provisions does not;apply to an S corporation?;a.;Section 1244 stock.;b. ?Partial liquidation? stock;redemption.;c. Tax-free ?A? reorganization.;d. Section 1202 capital gain exclusion.;1345. #51;Grams, Inc., a calendar year S corporation, reports $20,000 DPGR and $15,000 of;wages, and the S corporation?s QPAI is $5,000. Janet has a 40% interest in the;S corporation. All expenses that reduce DPGR are from wages, and all wages paid;relate to DPGR. How much QPAI and wages are allocated to Janet?;a.;None.;b. $2,000 and $6,000.;c. $5,000 and $15,000.;d. $5,000 and $20,000.;e. None of the above.


Paper#59241 | Written in 18-Jul-2015

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