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Exam 22: S Corporations

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Question 21

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Tax-exempt income at the corporate level flows through as exempt to S shareholders.

A) True
B) False

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Question 22

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Explain the OAA concept.

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S corporations report changes in the AAA...

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Question 23

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NOL carryovers from C years can be used in an S corporation year against ordinary income.

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

You are given the following facts about a 40% owner of an S corporation,and you are asked to prepare her ending stock basis. Beginning stock basis $36,800 Increase in AAA 32,000 Increase in OAA 6,300 Payroll tax penalty 2,140 Tax-exempt interest income 4,800 Insurance premiums paid (nondeductible) 2,700 Purchases of additional stock 22,000 ​

Individuals Adam and Bonnie form an S corporation,with Adam contributing cash of $100,000 for a 50% interest,and Bonnie contributing appreciated ordinary income property with an adjusted basis of $20,000 and a fair market value of $100,000. a.Determine Bonnie's initial basis in her stock,assuming that she receives a 50% interest. b.​ The S corporation sells the property for $120,000.Determine Adam's and Bonnie's stock basis after the sale. c.Determine Adam's and Bonnie's gain or loss if the company is liquidated.

You are given the following facts about a 50% owner of an S corporation.Compute his ending stock basis. Increase in AAA $32,000 Increase in OAA 6,300 Payroll tax penalty 2,140 Beginning stock basis 39,800 Tax-exempt interest income 4,800 Insurance premiums paid (nondeductible) 2,700 Stock purchases 22,000 ​

Samantha owned 1,000 shares in Evita,Inc. ,an S corporation,that uses the calendar year.On October 11,2015,Samantha sells all of her Evita stock.Her basis at the beginning of 2015 was $60,000.Her share of the corporate income for 2015 was $22,000,and she receives a distribution of $35,000 between January 1 and October 11,2015.Her stock basis at the time of the sale is:

The choice of a flow-through entity for a closely-held corporation often is between a(n) ____________________ (a Federal tax entity) and a(n) ____________________ (a state tax entity).

The passive investment income of an S corporation includes gains from the sale of securities.

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

Post-termination distributions by a former S corporation that are charged against ____________________ do not get tax-free treatment.

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

A two-or-more member ____________________ operates under ____________________ tax principles.

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

Which statement is correct with respect to filing an S election?

An S corporation does not recognize a loss when distributing assets that are worth less than their basis.

Estela,Inc. ,a calendar year S corporation,incurred the following items in 2015. Municipal bond interest $ 7,000 Sales 120,000 Depreciation recapture income 14,000 Long-term capital gain 20,000 Cost of goods sold (42,000) Administrative expenses (15,000) Depreciation expense (13,000) Charitable contributions (10,000) ​ Calculate Estela's nonseparately computed income.

If an S corporation has C corporation E & P and passive investment income in excess of ____________________ % of its gross receipts for ____________________ consecutive taxable years,the S election is terminated at the beginning of the ____________________ year.

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