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Exam 22: S Corporations

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Question 31

Multiple Choice

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A new S corporation shareholder can revoke the S election unilaterally,if he/she owns how much of the existing S corporation's stock?

A) More than 50%.
B) 50% or more.
C) The election can be revoked only if all of the shareholders consent.
D) The election cannot be revoked during the first year of the new shareholder's ownership.

E) All of the above
F) None of the above

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Question 32

True/False

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The corporate-level tax on recognized built-in gains applies when an S corporation disposes of an asset in a taxable disposition within five years after the date on which the S election took effect.

A) True
B) False

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Question 33

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Depreciation recapture income is a Schedule K item on the Form 1120S.

Which item is not included in an S corporation's nonseparately computed income?

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

Any excess of S corporation losses or deductions over the shareholder's combined stock and debt basis is suspended until there is a subsequent stock or debt basis.

A cash basis calendar year C corporation reports $100,000 of accounts receivable on the date of its conversion to S status on February 14.By the end of the year,$60,000 of these receivables are collected.Calculate any built-in gains tax,assuming that there is sufficient taxable income.

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

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

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 is:

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:

Which corporation is eligible to make the S election?

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

​Any tax-exempt interest that appears in OAA affects both stock basis and AAA.

____________________ husband and wife must consent to an S election if they own their stock jointly.

Claude Bergeron sold 1,000 shares of Ditta,Inc.,an S corporation,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.

An S corporation's LIFO recapture amount equals the excess of the inventory's value under ____________________ over the ____________________ value.

For a new corporation,a premature S election may not be effective.

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

If any entity electing S status is currently a C corporation,NOL carryovers from prior years ____________________ be used in an S corporation year.