Question 1

An S corporation can claim a deduction for its operating loss amounts.

Accepted Answer

A) True 
 B)False

Question 2

On January 2, 2019, Tim loans his S corporation $10,000.By the end of 2019, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000.During 2020, the company's operating income is $10,000.The company makes 2020 distributions of $8,000 to Tim.He reports a(n) :

Accepted Answer

A)  $2,000 LTCG.
B)  $8,000 LTCG.
C)  Stock basis of $2,000.
D)  Loan basis of $10,000.E) B) and C)
F) A) and C)

Question 3

Tax-exempt income at the S corporation level flows through as taxable income to the shareholder.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Since loss property receives a in basis without any loss recognition, S corporation distributions of loss property generally should be .

Accepted Answer

The answer of Since loss property receives a in basis...

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

A newly formed S corporation does not receive any tax benefit from a C corporation's NOL incurred in its first election tax year.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Identify a disadvantage of being an S corporation.

Accepted Answer

A)  Estates can be shareholders.
B)  Losses flow through immediately to the shareholders.
C)  Section 1202 treatment (qualified small business stock)  is not available.
D)  Tax-exempt income flows through as excludible to shareholders.
E)  All of these are advantages of the S election.F) A) and E)
G) None of the above

Exam 15: S Corporations

A newly formed S corporation does not receive any tax benefit from a C corporation's NOL incurred in its first election tax year.

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

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

Correct Answer
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An S corporation can claim a deduction for its operating loss amounts.

Correct Answer
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Tax-exempt income at the S corporation level flows through as taxable income to the shareholder.

Correct Answer
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On January 2, 2019, Tim loans his S corporation $10,000.By the end of 2019, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000.During 2020, the company's operating income is $10,000.The company makes 2020 distributions of $8,000 to Tim.He reports a(n) :

Correct Answer
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Identify a disadvantage of being an S corporation.

Correct Answer
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Since loss property receives a in basis without any loss recognition, S corporation distributions of loss property generally should be .

Correct Answer
verified

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

Correct Answer
verified

Exam 15: S Corporations

A newly formed S corporation does not receive any tax benefit from a C corporation's NOL incurred in its first election tax year.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An S corporation can claim a deduction for its operating loss amounts.

Correct AnswerverifiedShow Answer

Tax-exempt income at the S corporation level flows through as taxable income to the shareholder.

Correct AnswerverifiedShow Answer

On January 2, 2019, Tim loans his S corporation $10,000.By the end of 2019, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000.During 2020, the company's operating income is $10,000.The company makes 2020 distributions of $8,000 to Tim.He reports a(n) :

Correct AnswerverifiedShow Answer

Identify a disadvantage of being an S corporation.

Correct AnswerverifiedShow Answer

Since loss property receives a in basis without any loss recognition, S corporation distributions of loss property generally should be .

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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